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Uday Kaushish (Minor by His Mother and Natural Guardian, Mrs. Sheila Kaushish) Vs. Commissioner of Wealth-tax, Delhi-i, and Others. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberCivil Writ Petition No. 593 of 1974
Reported in(1982)29CTR(Del)217; [1982]137ITR906(Delhi)
AppellantUday Kaushish (Minor by His Mother and Natural Guardian, Mrs. Sheila Kaushish)
RespondentCommissioner of Wealth-tax, Delhi-i, and Others.
Cases ReferredMohinder Singh v. Chief Election Commissioner
Excerpt:
- - 2) on january 25, 1974, but without success. in view of this failure of the representation made before the departmental authorities the assessed filed this writ petition on may 7, 1974, along with an application for stay. -(1) if the wealth-tax officer is satisfied without requiring the presence of the assessed or production by him of any evidence that a return made under section 14 or section 15 is correct and complete, he shall assess the net wealth of the assessed and determine the amount of wealth-tax payable by him or the amount refundable to him on the basis of such return. (2) if the wealth-tax officer is not so satisfied, he shall serve a notice on the assessed either to attend in person at his office on a date to be specified in the notice or to produce or cause to be.....ranganathan j. - 'sheila theatre 70' is a building jointly owned by three brothers, ajay kaushish, sanjay kaushish and uday kaushish, each of whom is entitled to an one-third share in it. the present writ petition has been filed on behalf of minor, uday kaushish, by his mother, mrs sheila kaushish. there are four prayers in the writ petition : (1) to quash and set aside the order dated april 24, 1974, made by the commissioner of wealth-tax (respondent no. 1) dismissing the application of the petitioner under s. 25 of the w.t. act (hereinafter referred to as 'the act'); (2) to quash and set aside the reference made by the wto (respondent no. 3) under s. 16a of the w.t. act, referring the question of valuation of the sheila theatre to the district valuation officer (respondent no. 4); (3).....
Judgment:

RANGANATHAN J. - 'Sheila Theatre 70' is a building jointly owned by three brothers, Ajay Kaushish, Sanjay Kaushish and Uday Kaushish, each of whom is entitled to an one-third share in it. The present writ petition has been filed on behalf of minor, Uday Kaushish, by his mother, Mrs Sheila Kaushish. There are four prayers in the writ petition : (1) to quash and set aside the order dated April 24, 1974, made by the Commissioner of Wealth-tax (respondent No. 1) dismissing the application of the petitioner under s. 25 of the W.T. Act (hereinafter referred to as 'the Act'); (2) to quash and set aside the reference made by the WTO (respondent No. 3) under s. 16A of the W.T. Act, referring the question of valuation of the Sheila Theatre to the District Valuation Officer (respondent No. 4); (3) to restrain the District Valuation Officer (respondent No. 4) from proceeding with the valuation of the property above mentioned in pursuance of the reference made by the WTO referred to above; and (4) to direct the WTO to allow inspection of the records to the assessed to enable the assessed to satisfy herself regarding the opinion, if any, formed by the WTO under section s. 16A of the W.T. Act, before making a reference under the said section to the Valuation Officer and to direct a copy of the order passed by him under s. 16A to be supplied to the petitioner. The writ petition arises in regard to the valuation of the property above mentioned in connection with the wealth-tax assessments of the petitioner for the assessment years 1971-72, 1972-73 and 1973-74.

A brief Chronology of the relevant events will bring out the points raised by the petitioner and at issue events will bring out the points raised by the petitioner and at issue in this writ petition. For the assessment years 1971-72 to 1973-74, the assessed filed a return of net wealth, including therein an one-third share of the value of the above property belonging to the minor. The value had been shown at Rs. 7,97,800 on the basis on a report given be one R. G. Desai, an 'approved valuer' as defined in the Act. For the assessment years 1971-72 and 1972-73, the WTO served on July 2, 1973, notice on the petitioner under s, 16(2) of the Act calling upon her to appear before him on July 18, 1973. However, on July 18, 1973 no proceedings took place and the hearing was adjourned. Subsequently, in respect of these two assessment years 1971-72 and 1972-73, there was no further issue of any statutory notice to the petitioner under the Act. For the assessment year 1973-74 no notice under s. 16(2) was at all served.

On 7th January, 1974 the three co-owners received a letter from the District Valuation Officer, Income-tax Department (Valuation Cell), stating that the valuation of the property known as 'Sheila Theatre 70' situate at Original Road, New Delhi, had been referred to him by the WTO under s. 16A of the W.T. Act for determining the fair market value of the property as on march 31, 1971, March 31, 1972, and March 31, 1973. He declared his intention to inspect the property on January 18, 1974, called upon the assesseds to provide him necessary facilities for the inspection and also called upon them to produce certain documents and accounts for his consideration. The petitioner replied on January 17, 1974, raising various objections to the proposals of the District Valuation Officer. It was pointed out, inter alia, that no copy of the order passed by the WTO under s. 16A or the reference made to the valuation Officer had been communicated to the petitioner and it was urged that, without such an order and communication, the Valuation Officer could not assume any jurisdiction to value the property as desired by him. No reply was received and the petitioner approached the IAC (respondent No. 2) on January 25, 1974, but without success. The IAC informed the petitioner that the opinion of the WTO under s. 16A could not be communicated to the assessed as it was an inter-departmental communication. The assessed attempted on February 12, 1974, to obtain from the WTO an inspection of the relevant files to have a look at the proceedings by which the reference to the Valuation Officer had been made but the WTO declined to grant inspection, thought it appears that in connection with the assessment years 1969-70 and 1970-71 such inspection had been granted.

Arrived by the reference made by the WTO to the District Valuation Officer under s. 16A of the Act and by the refusal of the authorities to allow inspection of the records, the petitioner filed an application on march 5, 1974, before the Commissioner challenging the actions of the WTO in making the reference to the Valuation officer and in refusing to allow inspection (of the files). This application was dismissed by the Commissioner by his order dated April 24, 1974. The Commissioner dismissed the assesseds application on the short ground that the reference made by the WTO to the Valuation Officer did not amount to an order and that it was not, thereforee, amenable to revision under s. 25 of the Act. The commissioner also dealt with the merits of the revision which had been urged before him by the learned representative for the assessed and came to the conclusion that there was nothing wrong with the impugned action of the WTO.

In view of this failure of the representation made before the departmental authorities the assessed filed this writ petition on May 7, 1974, along with an application for stay. The writ petition was admitted on May 13, 1974 and an interim order restraining the respondents from proceedings with the valuation or completing the assessments was passed during the pendency of the writ petition The interim stay was made absolute on June 6, 1974. However, on an application made by the respondents, the stay order was modified on February 13, 1979, to the following effect :

'The assessment proceedings and the assessment, including the valuation by respondent NO. 4 may be made, but the recovery on the basis of the same shall not be made till the disposal of the writ petition. IT is further ordered that the valuation so made shall also be subject to the result of the writ petition.'

It appears that subsequently the Valuation Officer gave his report. Orders of assessment were passed on March 28, 1979, including in the assessments the value of the petitioners share on the basis of the figures of value of the property determined by the Valuation Officer as was obligatory on him under s. 16A(6). These figures were Rs. 39,59,000 for the assessment year 1971-72, Rs. 42,12,000 for the assessment year 1972-73, and Rs. 43,85,000 for the assessment year 1973-74.

Though the counter-affidavit to the writ petition and the rejoinder thereto are elaborate and several documents have also been annexed to these affidavits, the controversy between the parties before us lies within a narrow compass. Soil J. Sorabjee, learned counsel appearing for the petitioner, raised three contentions :

(1) on a proper construction of the provisions of s. 16 and s. 16A and the other relevant provisions of the Act, it is necessary that a notice under s. 16(2) should be issued before the WTO can refer the question of valuation to the Valuation Officer;

(2) even if the provisions of the Act are not constituted as placing on the WTO any such statutory obligation, the requirements of natural justice demand that the assessed should have such an opportunity; and

(3) the WTO can refer a matter to the Valuation Officer only if the conditions precedent thereforee mentioned in s. 16A are fulfillled. These conditions require the formation of an opinion by the WTO that, for certain reasons mentioned in the section, such a reference was necessary. In the present case, despite the assesseds repeated requests, she was not supplied with the information or material on the basis of which the WTO had formed the opinion nor, have any such circumstances as would warrant the opinion of the WTO been brought out in the reply filed on behalf of the respondents. In these circumstances, the conclusion is irresistible that the WTO formed the opinion under s. 16A on no material and, thereforee, the reference made to the Valuation Officer was liable to be quashed.

To appreciate these contentions, it is necessary to set out the relevant provisions of the Act. Sections 16 and 16A, earlier referred to, occur in Chap. IV of the Act which deals with the procedure for assessment. These proceedings commence with a return of net wealth filed by the assessed, on his own under s 14(1) or as required by the WTO, under s. 14(2). Section 15 enables his to file a return or revised return before actual assessment, with which we are not here concerned. Section 16, which deals with 'assessment', reads as under :

'16. Assessment. - (1) If the Wealth-tax Officer is satisfied without requiring the presence of the assessed or production by him of any evidence that a return made under section 14 or section 15 is correct and complete, he shall assess the net wealth of the assessed and determine the amount of wealth-tax payable by him or the amount refundable to him on the basis of such return.

(2) If the Wealth-tax Officer is not so satisfied, he shall serve a notice on the assessed either to attend in person at his office on a date to be specified in the notice or to produce or cause to be produced on that date any evidence on which the assessed may rely in support of his return.

(3) The Wealth-tax Officer, after hearing such evidence as the person may produce and such other evident as he may require on any specified points, and after taking into account all relevant material which the Wealth-tax Officer has gathered, shall, by order in writing, assess the net wealth of the assessed and determine the amount of wealth-tax payable by him or the amount refundable to him on the basis of such assessment.

(4) For the purpose of making an assessment under this Act, the Wealth-tax Officer may serve, on any person who has made a return under sub-section (1) of section 14 or upon whom a notice has been served under sub-section (2) of that section, or who has made a return under section 15, a notice requiring him to produce or cause to be produced on a date specified in the notice such accounts, records or other documents as the Wealth-tax Officer may require.

(5) If any person fails to make a return in response to any notice under sub-section (2) of section 14, or fails to comply with the terms of any notice issued under sub-section (2) or sub-section (4), the Wealth-tax Officer, after taking into account all relevant material which he has gathered, shall estimate the net wealth to the best of his judgment and determine the amount of wealth-tax payable by the person or the amount refundable to him on the basis of such assessment.'

Unlike under the I.T. Act, where the determination of the total income and tax payable by an assessed is a task that is and can be adequately faced and dealt with by the ITO (except perhaps in very rare cases), wealth-tax assessments can throw up difficult problems of valuation of various kinds of assets. The WTO will more often find himself unable to judge the correctness of the clause placed by the assessed on certain assets, to assess the evidence produced in support thereof or to arrive at a proper valuation of the assets himself without expert advice and assistance. The Act, thereforee, creates a 'co-ordinate authority' (we use the expression in a loose sense) who will discharge the WTOs function in this regard. The machinery for this procedure is outlined in s. 16A which was introduced by an Amendment Act of 1972 with effect from 1st January, 1973. It reads as follows :

'16A. Reference to Valuation Officer. - (1) For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, the Wealth-tax Officer may refer the valuation of any asset to a Valuation Officer -

(a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer, if the Wealth-tax Officer is of opinion that the value so returned is less than its fair market value;

(b) in any other case, if the Wealth-tax Officer is of opinion -

(i) that the fair market value of the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf; or

(ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do.

(2) For the purpose of estimating the value of any asset in pursuance of a reference under sub-section (1), the Valuation Officer may serve on the assessed a notice requiring him to produce or cause to be produced on a date specified in the notice such accounts, records or other documents as the Valuation Officer may require.

(3) Where the Valuation Officer is of opinion that the value of the asset has been correctly declared in the return made by the assessed under section 14 or section 15, he shall pass an order in writing to that effect and send a copy of his order to the Wealth-tax Officer and to the assessed.

(4) Where the Valuation Officer is of opinion that the value of the asset is higher than the value declared in the return made by the assessed under section 14 or section 15, or where the asset is not disclosed or the value of the asset is not declared in such return or where no such return has been made, the Valuation Officer shall serve a notice on the assessed intimating the value which he proposes to estimate and giving the assessed an opportunity to state, on a date to be specified in the notice, his objections either in person or in writing before the Valuation Officer and to produce or cause to be produced on that date such evidence as the assessed may rely in support of his objections.

(5) On the date specified in the notice under sub-section (4), or as soon thereafter as may be, after hearing such evidence as the assessed may produce and after considering such evidence as the Valuation Officer may require on any specified points and after taking into account all relevant material which he has gathered, the Valuation Officer shall, by order in writing, estimate the value of the asset and send a copy of his order to the Wealth-tax Officer and to the assessed.

(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.'

Reading this provision in the context of other provisions that provide that the Valuation Officer is one of the W.T. authorities specified under the Act (s. 12A) and that he has the same powers as the WTO of taking evidence, summoning witnesses, documents and account books, issuing commissions and so on (s. 37), the effect of s. 16A is that, once a reference is made by the WTO regarding any asset to the Valuation Officer, the latter steps into the shoes of the former for all practical purposes till he submits his report. On the submission of the report -whether accepting the assesseds valuation under sub-s. (3) or estimating it differently under sub-s. (4) - the proceedings revert to the WTO who completes the assessment, incorporating the effect of the report. But it is necessary to bear in mind that the Valuation Officer may not in most cases be called upon to express an opinion regarding all the assets of the assessed and will be asked to report on the value of only some of them. In fact, in every case, there will be assets capable of simple valuation like cash and movables and liabilities to be deducted in the computation and all these have to be considered and the net wealth and tax are determined only by the WTO. It is, thereforee, clear that though the Valuation Officer may step into the shoes of the WTO for a limited purpose, the basic position that it is the WTO, who is the assessing officer, remains unaltered. It is the WTOs order that is the order of assessment leading to further consequences, on the one hand, by way of recovery of tax, etc., and, on the other, by way of proceedings in appeal, revision, etc., under the Act. In the context of these provisions, the first argument raised on behalf of the petitioner is that a reference to the Valuation Officer under s. 16A cannot be made unless, before that is done, the WTO serves on the assessed a notice under s. 16(2) and gives him an opportunity to produce such evidence as he may consider necessary to rely upon in support of the return filed by him. For the purposes of this argument, it has to be assumed that we are dealing with a case where such a reference is valid and is made in the circumstances outlined in s. 16A. The point raised is a purely technical one and, as we shall indicate later, no real prejudice has been caused to the assessed by the course adopted by the WTO. Its only object appears to be to delay the valuation proceedings and one really wishes that the department had dealt with the objection pragmatically. The WTO could have easily conceded the assesseds plea, withdrawn the reference to the Valuation Officer, given the assessed a notice under s. 16(2) and, then, if still unconvinced of the assesseds case, referred the matter to the Valuation Officer. Such a course would have met the assesseds objection and caused the department no prejudice of any kind whatsoever, except for a short delay. As it is, the stand taken by the department has delayed the process of valuation by at least five years and even though the assessments have been completed subsequently, the appeals have been kept pending and the recovery of the tax postponed till this writ petition is disposed of. However, both parties chose to take a stand on principle and the issue, thereforee, needs to be resolved.

At first sight, it may appear that the assesseds contention is well founded. The language of s. 16(2) seems to be peremptory and to insist that a notice under s. 16(2) is a must before the completion of an assessment on figures different from those furnished by an assessed in his return. But two answers suggest themselves to our mind to repel this contention.

The first reply is that there is no requirement in s. 16(2) that the notice under that sub-section is to be served before the WTO makes a reference under s. 16A. Section 16(2) does not specify any point of time during the proceedings at which the notice there under should be issued or served. All that it requires is that such a notice must be served before the assessment is completed by the WTO. A 'section 16(2) notice' as a condition precedent to the completion of an assessment rejecting the returned figure of net wealth; it is not expressly or even impliedly, a condition precedent to a reference under s. 16A. A reference under s. 16A cannot, thereforee, be said to be vitiated because it was made before the WTO called upon the assessed under s. 16(2) to produce evidence in support of the return. We are conscious that this line of reasoning is open to one criticism which appears substantial but is not, in our opinion, really valid or forceful and it is this. It could be said that if a notice under s. 16(2) is not served and a reference is made to the Valuation Officer without such notice, the requirement of the sub-section would be rendered puerile and meaningless. No purpose would be achieved by the service of such a notice after the Valuation Officer has made his report, for, under s. 16A(6), the report of the Valuation Officer is binding on the WTO. In a situation where the WTO is statutorily bound to accept the report of the Valuation Officer and has no discretion to accept the assesseds figure even if he finds the evidence produced in response to the notice under s. 16(2) satisfactory, or even to modify the Valuation Officers figures in the light of such evidence, the issue of a notice under s. 16(2) at this stage would be truly meaningless and any hearing in pursuance thereof a mere empty formality. So, the argument runs, the notice under s. 16(2) should precede and not follow the reference under s. 16A. We do not find much force in this criticism. It is true that s. 16(2) only embodies the principle of natural justice that if the WTO thinks that a return is not correct and complete the assessed should be called upon and given an opportunity of supporting it with evidence, before an assessment, rejecting it, is made. But can it be said that in adopting the interpretation indicated by us, natural justice is denied to the assessed We think not. The provisions of s. 16A make it clear that when the matter is referred to the Valuation Officer, the latter has full discretion to accept the figures as returned by the assessed. But if he does not do this he has to propose his valuation and then give sufficient opportunity to the assessed to show cause why the proposed figures should not be adopted. The assessed, thereforee, gets a full opportunity of putting forward all the evidence that he desires and to persuade the Valuation Officer that his valuation deserves to be accepted. Hence, it is not correct to suggest that the interpretation of s. 16(2) indicated by us will prejudice the assessed in any manner whatsoever or really deprive him of an opportunity of producing evidence in support of the return before the officer whose judgment will really govern the issue. Moreover, s. 16(2) has no reference to any particular asset but to the assessment in general while s. 16A may be applied in respect of only some of the assets. All that s. 16(2) requires is that, before completing the assessment, the WTO should give a notice there under and it should be open to the assessed to place all the evidence he can in support of the return; only, in so far as the valuation of assets which has been referred to the Valuation Officer is concerned, there will be no duplication of the process. In this view, a notice under s. 16(2) in respect of assets other than the ones above referred to will still be necessary and meaningful. The interpretation of s. 16(2) suggested by us will not, thereforee, render s. 16(2) meaningless or otiose in any way. On the other hand, to interpret the sub-section in the manner suggested on behalf of the petitioner will only introduce a double hearing on the question of valuation, once before the WTO and again before the Valuation Officer. It will be appreciated that the first of these is totally meaningless when it is the second officer who is required by the statute to adjudicate upon the valuation of the asset in question. An interpretation leading to such a redundancy in procedure should be avoided.

The second reason why we are unable to accept the petitioners contention in the present case is that this sub-section envisages only a matter in which the assessed has not already placed on record the evidence on which he wants to rely in support of the return made by him and not to a case where the assessed has already done so. In this context, it is necessary to point out that a return, whether of net wealth under the W.T. Act or of total income under the I.T. Act, is only a statement of figures and claims. It only gives a summary of the assesseds case and it need not contain an adequate, or even any, Explanationn of the details of various figures. For instance, the assessed may give his valuation of an asset owned by but may not fully disclose the basis of such valuation or necessarily file a valuers certificate in support thereof. In such cases, the assesseds return cannot be taken to be correct and complete by the officer and he will have to call upon the assessed to produce evidence in support of the return. On the other hand, where the evidence is already there in the form of an approved valuers certificate, no purpose would be served by such a notice. Even where he decides to value the asset himself, he can proceed further without calling upon the assessed under s. 16(2) in respect of that asset. We should not be understood as saying that the WTO can straightway proceed to reject the return and make an assessment. It will still be his duty to ascertain the material for it, call for such clarifications or other evidence as he may require or consider necessary or call for other books, documents or record to collect necessary data for assessment. These procedures are envisaged and safeguarded by s. 16(3) and (4). These provisions, which not only confer a power on the officer to make enquiries but also embody the principles of natural justice, ensure that the WTO does give an assessed a full opportunity of meeting all his objections before the assessment is made at a figure different from what has been returned. In fact the provisions of sub-ss. (2), (3) and (4) of s. 16 overlap one another to a substantial extent and the above interpretation will not prejudice an assessed in any manner. No special purpose is served by insisting that a notice under s. 16(2) is mandatory in such a case.

The nest argument addressed on behalf of the petitioner is a variant of the argument discussed above but with the emphasis not on s. 16(2) but on a general principle. It is pointed out that a reference to the Valuation Officer by the WTO is not automatic in all cases but requires a preliminary satisfaction on the part of the WTO that the assesseds valuation is not correct. The WTO has to examine the return sent by the assessed and form the requisite opinion under s. 16A(1) which necessitates his forwarding a reference to the Valuation Officer who will proceed to conduct a full-fledged enquiry into the matter. It is submitted that, whether the statute specifically provides for it or not, it is necessary and desirable for the WTO to give an opportunity to the assessed to explain and satisfy the WTO that his valuation is all right. It is pointed out that there may be cases in which the WTO may have formed his impression due to some mistake, doubt, ambiguity or misappreciation of facts and law and, given a chance to explain, the assessed may be able to persuade him and thus completely obviate unnecessary harassment of an enquiry and investigation by the Valuation Officer. The rules of natural justice require, it is said, that the assessed should be heard before he is made to face an enquiry by the Valuation Officer.

In support of his contention, Sri Sorabjee, relied on three English decisions. The first of these is the decision of the House of Lords in Wiseman v. Borneman [1969] 3 All ER 275; [1970] 75 ITR 652, a surtax case, which contains an interesting discussion on the applicability of the principles of natural justice to various types of situations, in particular, a situation where an enquiry is a prelude to some further investigation or action. The case arose out of the provisions of s. 28 of the Finance Act, 1960, which was intended to cancel tax advantages from certain transactions in securities. Under sub-s. (1), the section came into operation when the circumstances defined in sub-s. (2) of the section existed and a person obtained a tax advantage in consequence of a transaction in securities or was in a position to do so. On such being the case, the Commissioner of Inland Revenue were empowered, under sub-s. (3), to offset the advantage derived or sought to be derived by making an assessment or reassessment, by nullifying a right to refund of tax or by requiring the return of a refund already made and so on, on such basis as the Commissioners may specify in a notice in writing served on the person concerned as being requisite for contracting the tax advantage so obtained or obtainable. But sub-s. (4) provided that no notice under sub-s. (3) shall be given until the Commissioners had notified the person concerned that they had reason to believe that the section might apply to him in respect of transactions specified in the notification. If the person concerned was of opinion that the section did not apply to him, he could, within thirty days, make a statutory declaration to that effect setting out the facts and circumstances on which his opinion was based and send it to the Commissioners. If nothing more happened, the section could not be applied to him in respect of the transactions in question and the matter was to be dropped. If, however, on receipt of the statutory declaration, the Commissioners saw reason to take further action, they had to proceed, under sub-s. (5), to obtain the approval of a Tribunal constituted for the purpose. They were to send to the Tribunal the statutory declaration sent in by the person concerned together with a counter-statement on their part and a certificate to the effect that they saw reason to take further action in the matter. The Tribunal was to take into consideration the declaration and the certificate and the counter-statement, if any, and then determine whether there was or was not a prima facie case for proceeding further in the matter. If the Tribunal answered the question in the negative, the matter would be dropped. However, if it answered the question in the affirmative, further proceedings would go on culminating in the notice under sub-s. (3) specifying the adjustments made to offset the tax advantage. Sub-section (6) provided for an appeal from the notice under sub-s. (3) to the Special Commissioners. From the determination of the Special Commissioners, an appeal could be taken by either party to the Tribunal, on the merits of the action taken. In the context of these provisions, the question that arose was, whether, on principles of natural justice, the person against whom action was proposed under the section could insist on a right to see and answer the contents of the counter-statement filed by the Commissioners before the Tribunal. The question was answered in the negative but certain observations in the speeches of he learned law Lords have been relied upon by Sri Sorabjee. Lord Guest, after pointing out, that, to some extent, at any rate, the Tribunal under consideration was a judicial Tribunal which had to apply the principles of natural justice and give the taxpayers an opportunity of stating their case, proceeded to deal with a contention, that 'as a general rule, where a preliminary point was to be decided, the court would not imply a term that the rules of natural justice should be applied', in the following words (p. 75 ITR660) :

'.... I can see no reason why, if the principles of natural justice have to be applied to a Tribunal entrusted with a final decision, the same should not be true of a Tribunal which has to decide a preliminary point which may affect parties rights. There is, moreover, in my view, no authority for this latter proposition of the Commissioners. Cozens v. North Devon Hospital Management Committee [1966] 2 All ER 799; [1966] 2 QB 330 (CA), which was cited in support of this contention is not a satisfactory decision, The circumstances were special and it should not, in my view, be followed as a matter of principle.'

Lord Donovan agreed that one could not dismiss the matter 'simply by saying that proceedings before the Tribunal a this stage were merely for the purpose of deciding whether there is a prima facie case and that accordingly the rules of natural justice do not apply. 'Lord Wilberforce was more emphatic in dealing with this contention (p. 75 ITR667 ) :

'... I cannot accept that there is a difference in principle, as to the observance of the requirements of natural justice, between final decisions, and those which are not final, for example, decisions that as to some matter there is a prima facie case for taking action. The suggestion that there is some such difference which was sought to be extracted from the decisions of the Court of Appeal : [1969]71ITR651(Cal) and from the later case of Parry Jones v. Law Society [1968] 1 All ER 177 (CA), is one that I cannot accept. Even if there were anything to be said in favor of treating one class of decision in a different manner from the other, this would be of little value, so great is the range of difference between prima facie decisions themselves. At one end, the decision may be merely that of an administrative authority that prima facie case exists for taking some action or proceedings as to which the person concerned is to be able in due course to state his case; at the other end, a decision that a prima facie case has been made out may have substantive and serious effects as regards the person affected, as by removing from him an otherwise good defense [Cozens v. North Devon Hospital Management Committee [1966] 2 All ER 799 (CA)], or by exposing him to a new hazard or as when he is prevented, however temporarily, from taking action which he wishes to take. In the present case, the decision of the Tribunal may have the effect of denying the taxpayer of the opportunity of eliminating, in liming, a claim which may otherwise have to be fought expensively through a chain of courts.'

Sri Sorabjee next referred to the decision of the Court of Appeal in Re Pergamon Press Ltd. [1970] 3 All ER 535. This was a case under the Companies Act and involved the question of the extent to which the inspectors appointed by the Board of Trade to investigate into the affairs of a company were under a duty to disclose to the company the information and material made available to them. Lord Denning M.R. rejected on the one hand the claim of the directors of the company that they had a right to see the transcript of the evidence of witnesses adverse to them and also to see any proposed finding against them before it was included in the inspectors report, much as if it were a judicial enquiry in a court of law in regard to an offence. But, on the other, he pointed out that the claim on behalf of the inspectors that they were not bound by the rules of natural justice because they were making, not any determination or decision but only an investigation or enquiry was also too extreme to be accepted. It was true that the inspectors did not constitute a court and the proceedings before them were not judicial proceedings; they were not even quasi-judicial for they determined or decided nothing; their enquiries were private and the public was not admitted to their hearings; and they did not even decide whether there was a prima facie case, as in Wiseman v. Borneman [1969] 3 All ER 275; [1970] 75 ITR 652 (HL). The Master of the Rolls proceeded, however, to observe [1979] 3 All ER 539 :

'But this should not lead us to minimise the significance of their task. They have to make a report which may have wide repercussions. They may, if they think fit, make findings of fact which are very damaging to those whom they name. They may accuse some; they may condemn others; they may ruin reputations or careers Their report may lead to judicial proceedings. It may expose persons to criminal prosecutions or to civil actions.. Seeing that their work and their report may lead to such consequences, I am clearly of opinion that the inspectors must act fairly... The inspectors can obtain information in any way which they think best, but before they condemn or criticise a man, they must give him a fair opportunity for correcting or contradicting what is said against him. They need not quote chapter and verse. An outline of the charge will usually suffice.'

The same rule was reiterated by Lord Denning, 'with lovely realism and principled pragmatism' in Selvarajan v. Race Relations Board [1976] 1 All ER 12 (CA), in the following words (p. 19) :

'The fundamental rule is that, if a person may be subjected to pains or penalties, or be exposed to prosecution or proceedings, or deprived of remedies or redress or in some such way adversely affected by the invigilation and report, then he should be told the case made against him and be afforded a fair opportunity of answering it.'

Relying on the observations in the above cases, sri Sorabjee contended that the WTO in acting under s. 16A would be exposing an assessed to a 'new hazard' or 'to pains, penalties or proceedings' which he could avoid, if given an opportunity to explain and 'eliminate, in liming, if he can, a claim which may otherwise have to be fought expensively through a chain of courts'. He says that, in the context, the grant of such an opportunity was an essential requirement of natural justice.

Interesting as the argument is, we are unable to accept it. We may point out that the observations in Wiseman [1969] 3 All ER 275; [1970] 75 ITR 652 (HL) seem to have been somewhat qualified and restricted in the decision of the House of Lords in Pearlberg v. Varty [1972] 2 All ER 6. It is, however, unnecessary to go into these distinctions between a preliminary and final decision in greater depth. For, as pointed out by the Supreme Court in Mohinder Singh v. Chief Election Commissioner, : [1978]2SCR272 , after a consideration of the above and sooner, : [1978]2SCR272 , after a consideration of the above and other rulings, 'the glory of the law is not that sweeping rules are laid down but that it tailors principles to practical needs, doctors remedies to suit the patient, promotes, not freezes, life's processes'. The Supreme Court referred to Lord Reads observations in Wiseman case [1970] 75 ITR 652 that he would be 'sorry to see this fundamental general principle degenerate into a series of hard and fast rules', to the emphasis of Tucker L.J. in Duke of Norfolks case [1949] 1 All ER 109 (CA) that 'the requirements of natural justice must depend upon the circumstances of the case, the nature of the enquiry, the rules under which the Tribunal is acting, the subject-matter that is being dealt with and so forth' and summed up the position thus :

'No doctrinaire approach is desirable but the court must be anxious to salvage the cardinal principle to the extent permissible in a given case.'

We have, thereforee, to examine the question before us in the context of the provisions which we are called upon to consider and the circumstances of this case and decide whether a hearing, before the WTO refers the matter to the Valuation Officer, is an essential element of fairplay and justice to the assessed. It seems to us that the answer to this question should be in the negative. The purpose of s. 16 is to enable a proper assessment being made by the WTO and this section provides the machinery to enable the WTO to arrive at a proper assessment. But, having regard to the nature of the problems that may arise, the Act envisages that the Valuation Officer may take the place of the WTO in so far as the process of valuation Officer may take the place of the WTO in so far as the process of valuation of certain assets is concerned. Section 16A is merely a procedural section which enables the Valuation Officer to step into the picture and into the shoes of the WTO. This transition from the WTO to the Valuation Officer does not affect the assesseds rights in any prejudicial manner. Surely, the assessed cannot claim a right to have his assets valued by the 'lay' WTO rather than an 'expert' Valuation Officer. The content of the assesseds rights is not in any other manner whittled down by the reference. There was some discussion before us whether the Valuation Officer was bound by the rules framed under the Act in regard to valuation (e.g., r. 1BB) in the same way the WTO was. But we express no opinion on that question as the valuation in the present case involves the consideration of no such rule and the issue is a debatable one. So far as the present case is concerned, it is fully open to the assessed to urge before the Valuation Officer every objection and plea that the she could have urged before the WTO including the plea that the valuers report submitted by her is correct and complete and, thereforee, acceptable. The assessed has had the opportunity of setting out the basis of the returned value in the return and its enclosures including the valuers report. It is true that if the assessed knows what the WTOs reaction is to the valuers report or his return, he may be able, in some cases at least, to correct or contradict the WTOs impressions, and the WTO may perhaps be acting wisely and prudently if he seeks, at that stage also, the assesseds clarifications on his doubts. But the question is whether the omission, failure or even refusal by the WTO to give this chance to the assessed offends ones sense of justice and fair deal. We think that, in this respect, the situation here is very much analogous to that of the taxpayer in the Wiseman case [1970] 75 ITR 652 (HL) who, had he been confronted with the counter-statement of the Commissioners, would have been in a more advantageous and happier position to meet the prima facie case sought to be made out against him and, as in that case, so here, it seems to us that a failure on the part of the WTO to give a hearing before he formed his prima facie opinion and turned the proceedings over to the Valuation Officer does not offend the principles of natural justice or result in any unfairness, prejudice or inequity to the taxpayer.

The third argument of Sri Sorabjee, again a very interesting and plausible one in other contexts, should it seems to us, fail on the facts and circumstances of the present case. Sri Sorabjees contention is very brief. He points out that under s. 16A, the reference to the Valuation Officer is not automatic but is dependent on the fulfillment of certain conditions precedent set out in sub-s. (1). The urges that the existence of material before the WTO to justify the reference - thought not its adequacy or sufficiency - is a justiciable issue. he points out that, in spite of specific averments in the writ petition (para. 14F), that there was no material and that, in any case, no such material was ever disclosed to the petitioner, the respondents have placed no material before the court in this regard. Relying strongly on the observations of the Supreme Court in the case of Barium Chemicals [1966] 36 Comp Case 639, 657, 661, he contends that the reference to the Valuation Officer was without jurisdiction and is liable to be quashed.

The legal proposition urged by Sri Sorabjee that the WTO should satisfy this court that he had material before him to entertain the 'opinion' that the value of the property as returned by the assessed, though in accordance with the estimate made by a registered valuer,. is 'less than its fair market value' is unexceptionable. His criticism is also well founded that the respondents have not squarely met the petitioners averments in the reply filed by them. In fact, having regard to the fact that the reasons are not secret and have, in fact, been communicated to the assessed for earlier years, we are indeed surprised that the department should have taken up a strange attitude in this regard. However, in a writ petition, and particularly one for a certiorari, the original records themselves can and should be perused by the court to satisfy itself on this issue. In fact, a perusal of even the papers filed before us by the parties at the time of hearing clearly show that the WTO had material before him on the basis of which he referred the matter to the Valuation Officer and that this was also within the knowledge of the petitioner.

We have referred earlier to the representation made on behalf of the three owners, Sanjay, Ajay and Uday, on January 25, 1974, protesting against the proceedings initiated by the Valuation Officer. In para. 2 of this latter, it is admitted that, in respect of the proceedings pertaining to the assessment years 1966-67 to 1970-71, in the case of Ajay, and to the assessment years 1969-70 and 1970-71, in the case of Uday and Sanjay, copies of the latter of reference under s. 16A were furnished to the assesseds. It is seen from this letter dated August 6/17, 1973, that though assessments had been made on these assesseds for the above years on the basis of the registered valuers report, the WTO subsequently came to the conclusion that these assessments were erroneous and moved to have them set aside by the CWT under s. 25(2) of the W.T. Act. The CWT by his orders dated February 1, 1973, had set aside the assessments holding that there was a gross under-valuation of the said property and that this should be got redone by reference to the Valuation Officer. Accordingly, the above reference was made to the Valuation Officer and the letter discloses the following material on which the WTO relied for making the reference :

(a) The valuer had considered only the land and building method. Even in doing so, he had taken the value of the land at Rs. 50 per sq. yard even though the valuation report itself refers to sales of plots (though smaller in size) at Rs. 250 per sq. yard. A deduction at 50% allowed by the valuer, as the land was leasehold, ignored the fact that the lease would subsist for many more years to come;

(b) considering the location of the property, prices of cinema plots and plots licensed for construction of multistoreyed commercial buildings, the valuation was low; and

(c) the gross annual rent derived from the property (in respect of which a chart was enclosed with the letter) was Rs. 2,52,000 since assessment year 1966-67, and the net annual value was Rs. 2,04,840. If the rental method of valuation were applied, the value of the property would work out to much more than the value returned.

In other words, a reference has been made to the Valuation Officer in those years and cases on a detailed consideration and a reference for the later years with which we are concerned would appear to be justified, particularly when the assesseds are relying only upon a like report by the same valuer. It seems that there have been subsequent developments and proceedings. It appears that the order of the CWT was set aside by the Tribunal. There have been other proceedings by way of appeal before the Tribunal and the High Court in this and allied cases. But we are not concerned with all these proceedings here nor are we concerned with the correctness or otherwise of the conclusions of the WTO or Commissioner. All we are concerned with is the short question whether the WTO had some material before him to form an opinion that the value returned by the assessed, though supported by the report of a registered valuer, did not reflect the market value of the property. In our view, it is difficult to contend that there was no such material. We, thereforee, reject this contention of the learned counsel for the petitioner.

No other contentions were urged before us. The writ petition, thereforee, fails and is dismissed with costs. Counsels fee, Rs. 500.


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