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Kanchanbhai Raojibhai AmIn Vs. Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberSpecial Civil Application No. 6148 of 1983
Judge
Reported in[1986]157ITR791(Guj)
ActsEstate Duty Act, 1953 - Sections 4(3)
AppellantKanchanbhai Raojibhai Amin
RespondentUnion of India and ors.
Appellant Advocate G.N. Desai, Adv.
Respondent Advocate R.P. Bhatt, Adv.
Cases Referred(see Barium Chemicals Ltd. v. Company Law Board
Excerpt:
direct taxation - renewal of appointment - section 4 (3) of estate duty act, 1953 - petitioner appointed as valuer under section 4 (3) - respondent refused to renew appointment - petition for quashing respondent's decision - no opportunity given to petitioner to show and satisfy as to how he concluded that valuation made by petitioner not proper - even assuming valuation made by petitioner not satisfactory it is not proper to assume that petitioner lacked sufficient experience - held, impugned decision being vitiated quashed. - - 2. the petitioner is a bachelor of engineering (civil) from the gujarat university and is also a member of the institution of engineers (india) as well as associate member of the institution of surveyors (india). the petitioner started practising as a.....b.k. mehta, j.1. the petitioner, who was appointed as a valuer under section 4(3) of the estate duty act, 1953, is aggrieved by the decision of the respondents contained in the letter of september 12, 1983, refusing to renew his appointment. the petitioner has, therefore, moved this court for appropriate writs, orders and directions to quash and set aside the said decision and enjoining on the respondents to renew the appointment of the petitioner as valuer for the purposes of valuation the properties under the said act. in order to appreciate the challenge, it may be worthwhile to state shortly the facts and circumstances on which the decision for refusal or renewal was taken. 2. the petitioner is a bachelor of engineering (civil) from the gujarat university and is also a member of the.....
Judgment:

B.K. Mehta, J.

1. The petitioner, who was appointed as a valuer under section 4(3) of the Estate Duty Act, 1953, is aggrieved by the decision of the respondents contained in the letter of September 12, 1983, refusing to renew his appointment. The petitioner has, therefore, moved this court for appropriate writs, orders and directions to quash and set aside the said decision and enjoining on the respondents to renew the appointment of the petitioner as valuer for the purposes of valuation the properties under the said Act. In order to appreciate the challenge, it may be worthwhile to state shortly the facts and circumstances on which the decision for refusal or renewal was taken.

2. The petitioner is a Bachelor of Engineering (Civil) from the Gujarat University and is also a member of the Institution of Engineers (India) as well as Associate Member of the Institution of Surveyors (India). The petitioner started practising as a consulting engineer and valuation expert at Ahmedabad in Gujarat State since 1958-59. The petitioner immediately after his graduation joined the firm of M/s. Amin & Desai as an Assistant Engineer somewhere in 1955 and in view of his ability and experience, he was taken as a partner in the said firm in 1959. It appears that the petitioner made an application on February 14, 1969, to the Government of India in the Department of Revenue and Insurance in the Ministry of Finance for being appointed as an approved valuer for taxation laws, namely, the Estate Duty Act and the Wealth-tax Act, for the purposes of valuation of real properties. The petitioner appears to have been appointed in pursuance of this application as an approved valuer under section 4(3) of the Estate Duty Act with effect from May 9, 1969, which appointment appears to have been communicated, vide letter of May 21, 1969. Pursuant to the amendment in the Wealth-tax Act somewhere in the year 1973 requiring the appointment of valuers for the purposes of the valuation of immovable properties for the purposes of the Wealth-tax Act, it became necessary for the petitioner to make an application in the year 1973 for being appointed as a valuer for purposes of valuation under the Wealth-tax Act, 1957. Accordingly, he was appointed as a valuer with effect from October 12, 1973. However, his appointment as approved valuer under the Estate Duty Act came to an end somewhere on or about May 8, 1974. The petitioner, therefore, by his letter dated May 7, 1974, addressed to the Central Board of Direct Taxes, respondent No. 2 herein, for renewal of his appointment as a valuer. The Union Government, respondent No. 1 herein, on being satisfied about the qualifications and experience of the petitioner as a valuer for purposes of the Estate Duty Act, renewed the appointment of the petitioner for a further period of five years as intimated to the petitioner, vide letter of the Union Government dated June 17, 1974. The appointment was under section 4(3) of the Estate Duty Act, 1953, for a period of five years from the date of issuance if the said letter. However, before the expiry of this renewal, the petitioner inquired from the Union Government as to whether his appointment would be required to be renewed in view of the notification issued by the Central Government on July 26, 1975, specifying the names of persons appointed as valuers under section 4(3) of the Estate Duty Act for different categories of assets and fixing scale of charges for the remuneration . The Union Government, by its letter of April 1, 1976, informed the petitioner that the question of renewal would arise only on expiry of his period of appointment on June 17, 1974, which was to remain for five years. The petitioner, therefore, on expiry of the aforesaid period of five years on June 16, 1979, applied for renewal of his appointment as an approved valuer by his application of January 19, 1980. The petitioner was required to complete certain formalities, namely, furnishing an income-tax clearance certificate and to submit the application in the prescribed pro forma. These formalities were completed by the petitioner and the particulars were furnished under cover of his letter dated July 2, 1981, the receipt of which was acknowledged by the letter of the Union Government of July 16, 1981.

3. To the surprise of the petitioner, he was required by the Income-tax Officer, Professional Circle III, by his January 23, 1982, to attend the office of the said Income-tax Officer on January 29, 1982, along with the details of cases in which valuations had been made by the petitioner for direct tax purposes. A reminder was also received by the petitioner from the Income-tax Officer, vide his letter of February 23, 1982, requesting him further to furnish the details of valuation reports prepared by the petitioner for different assets which he might have submitted to the Income-tax Department. The petitioner, under cover of his latter of February 26, 1982, submitted the necessary details about the valuation made by the petitioner for purposes of taxation laws. He also submitted under cover of his letter of March 2, 1982, a separate list of cases wherein representations were made either before the valuation Cell of the Income-tax Department and/or before the higher authorities by the firm of the petitioner since that information was also called for. Again, the said Income-tax Officer, by his letter of August 20, 1983, wrote to the petitioner to submit before him the details of property of City Survey No. 4225 known as (Borsali) the valuation of which was done by the firm of the petitioner and he was required particularly to bring the valuation arrived at for the assessment year 1969-70. The petitioner was advised to submit all the details immediately including the details of the owner of the property. The petitioner immediately complied with the request under cover of his letter of September 27, 1982. The petitioner clarified, however, that the valuation of the said property was originally made by Shri G. S. Desai, partner of his firm, and the estimation of the fair market value of the said property was made by the petitioner when an objection was submitted to the valuation Officer. It was also pointed out in the said letter that under section 16A(4) and 16A(5) of the Wealth-tax Act, the estimation of fair market value was arrived at by the valuation Officer of the Income-tax Department and also the valuation of the said property was finalised by the Appellate Assistant Commissioner and the Income-tax Tribunal, Ahmedabad, Bench B. For a period of one year, there was no further response from the authorities and all of a sudden in September, 1983,the petitioner was informed by the Central Board of Direct Taxes, vide its letter of September 12, 1983, that the Department expressed its inability to appoint the petitioner as a valuer of immovable properties under section 4(3) of the Estate Duty Act for the reason that the requisite conditions as laid down in para. (I)(ii)(B) of annexure I of the Estate Duty Notification bearing reference No. 300/355/74-ED dated August 12, 1975, were not satisfied by the petitioner and, therefore, in the opinion of Board, he was not found fit for appointment as valuer. It is this decision of the respondent which is under challenge before us.

4. In response to the rule issued by this court, the reply affidavit of Shri Arvind Pinto, Under Secretary to the Central Board of Direct Taxes, New Delhi, has been filed on behalf of the respondents. The only material contention which has been set out in the reply affidavit resisting this petition is in the following terms :

'I submit that simply because the petitioner may have been continued as approved valuer earlier, it does not give him prescriptive or permanent right to continue as departmental valuer for years to come. It was found that the opinion of the petitioner were not in accordance with the procedure laid down and were such which would result in prejudice to the interest of the Revenue. When the opinion of the petitioner as valuer, which are respected by all authorities are not in accordance with law or in accordance with the laid down standards, the petitioner cannot be considered to be fit to be continued/appointed as departmental valuer. In fact, petitioner's attention was also drawn to this fact.

I submit that the contention of the petitioner that there may be errors of judgment in the valuation reports submitted from time to time is not correct. Ordinarily, for valuation of movable and immovable properties, now several tests are laid down and guidelines are issued. Judgments are also available on the point and hence even if there may be variations in the assessments no other counts, there should be no variation in so far as the valuation of the property is concerned. The valuer is expected to adopt proper valuation methods, so that right up to the highest authority, the reports are sustained. In the instant case, the reports of the valuer, namely, petitioner, have been questioned and it is found that there is understatement in the valuations which has caused serious prejudice to the Revenue. Hence, the petitioner cannot be considered to be a person fit to be continued/appointed as the valuer for the Income-tax Department under the provisions of the Estate Duty Act.

I submit that when the highest authority like the Central Board of Direct Taxes has after consideration of the relevant matters taken a decision not to appoint or continue the petitioner as the valuer, the same cannot be questioned, since otherwise it will tantamount to the court sitting in appeal over the decision of the Central Board of Direct Taxes. If the Central Board of Direct Taxes had not applied its mind or it had taken extraneous consideration into mind, possibly the court may have interfered. The decision of the Central Board of Direct Taxes cannot be considered to be arbitrary or unreasonable, that is, body which is looking after the interest of the Revenue. Therefore, in the interest of the Revenue and in public interest, when the petitioner is not continued/appointed as the valuer, the court ought not to interfere.'

5. At the time of hearing of this petition, Mr. G. N. Desai, learned advocate for the petitioner, urged the following there contentions :

'1. The decision of the Union Government not to renew the appointment of the petitioner as a valuer is based on extraneous considerations and grounds which are not germane to the questions of granting approval to valuers under the relevant provisions of the Estate Duty Act and the rules made in that behalf and the notification issued by the Central Government in connection therewith.

2. The impugned decision of the Union Government is bad in law and vitiated inasmuch as there is complete non-application of mind on the part of the competent authority about the renewal of the appointment of the petitioner.

3. In any case, the decision is bad in law, void and ineffective inasmuch as it was taken by the Union Government without giving an adequate opportunity of hearing to the petitioner to make his submissions in respect of the material on the basis of which the impugned decision has been arrived at and, therefore, it is violative of the principles of natural justice and fair play.

6. Before we deal with these contentions, it would be necessary to shortly advert to the relevant legal provisions as well as the notification prescribing the qualifications and experience for the appointment of valuers under the Estate Duty Act. Sub-section (3) of section 4 of the Estate Duty Act, 1953, provides as under,

'The Central Government shall, within twelve months after the commencement of this Act and may thereafter from time to time, appoint a sufficient number of qualified persons to act as valuers for the purposes of this Act and shall fix a scale of charges for the remuneration of such persons.'

7. Sub-section (5) of section 4 provides that all officers and persons employed in the execution of the said Act, other than valuers, shall observe and follow the orders, instructions and direction of the Board. The Board has been defined by sub-section(2) of section 2 to mean the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963. A notification has been issued by the Union of India bearing No. 5/77/68-Ed dated July 16, 1968, prescribing qualifications of persons who could be appointed as valuers and also about the provisions to be followed for the appointment of such valuers. Clause 2 of the said notification, inter alia, provided that for purposes of valuation of immovable properties other than agricultural lands and coffee estates, the category of valuers would be engineer, surveyor or architect, and mining engineer for mines and quarries. Clause 3 prescribes qualifications for this particular category of engineer, surveyor or architect, mining engineer for mines and quarries. Sub-clauses (i) and (ii) of clause 3 read as under :

'(i) The valuer must either be a graduate in engineering, mining or architecture of a recognised university or be a member or holds diploma of a recognised institute or institution of engineers, architects, surveyors or school of mines, the membership or diploma of which is recognised as sufficient qualification for the purposes of recruitment to superior posts and services under the Central Government; and

(ii) he must have been in practice as consulting engineer, mining engineer, surveyor or architect for not less than seven years.'

8. Clause 4 of the said Notification provides for the method of making an application. Clause 6 of the notification empowers the Central Government to call for any other information or for causing any such inquiries to be made as it deems fit. Clause 7 provides for the tenure of initial appointment for a period of five years and for the renewal thereof for a similar period if the applicant satisfies the qualification prescribed from time to time. The Central Government is further empowered by sub-clause (3) of clause 7 to remove the name of any person from the list of valuers if the Government finds him guilty of any misrepresentation in furnishing particulars of his qualifications and experience or of any misconduct in connection with any valuation proceedings.

9. It appears that by a subsequent notification bearing reference F. No. 300/355/74-ED, which was issued somewhere in 1975 in supersession of all previous notifications issued by the Ministry regarding appointment of valuers under section 4(3) of the Estate Duty Act, 1953, it was notified that the Central Government proposes to appoint persons as valuers under section 4(3) of the Estate Duty Act, 1953, for different categories of assets and to fix a scale of charges for their remuneration. This notification admittedly came into force with effect from August 1, 1975. Clause 2 of this subsequent notification prescribes that persons desiring to be appointed as approved valuers must satisfy the conditions mentioned in annexure I to the notice and should apply for appointment in the form prescribed in annexure II. Clauses 3 and 4 prescribed disqualification for being appointed as valuer if the person concerned is employed in Government or with any other employer or has been dismissed or removed from Government service, or has been convicted of any offence under the Direct Taxes Act or is an undischarged insolvent, or has been convicted of any offence and sentenced to a term of imprisonment or has been found guilty of misconduct in his professional capacity which in the opinion of the Central Government renders him unfit to be registered as a valuer. Clause 5 of the subsequent notification prescribes as to how five years' experience prescribed in annexure I is to be computed. Annexure I which prescribes the qualifications and experience need not set out in extenso since the case of the petitioner is covered by (1)(i) and (ii)(B). The relevant part of this annexure reads as under :

'(1) A valuer of immovable property (other than agricultural lands, plantations, forest, mines and quarries) shall have the following qualifications, namely :

(i) he must either be a graduate in civil engineering architecture or Town Planning of a recognised university or possess a qualification recognised by the Central Government for recruitment to the superior posts and services under the Central Government in the field of civil engineering, architecture or town planning, and...

(B) he must have been in practice as a consulting engineer, surveyor or architect for a period of not less than five years and must have, in the opinion of the Board, acquired sufficient experience in any of the following fields :

(a) valuation of buildings and urban lands;

(b) quantity surveying in building construction;

(c) architectural or structural designing of building or town planning; or

(d) construction of buildings or development of land.'

10. It would thus be clear that the qualifications which are now prescribed under this subsequent notification for fresh appointment or renewal are slightly different from what were in force under the previous notification. A conjoint reading of these two notifications indicates that over and above the qualifications and experience which were prescribed under the old notification which required a person seeking the appointment or renewal to be a graduate in engineering, mining or architecture of a recognised university or a member of recognised institute having standing as a consulting engineer, mining engineer, surveyor or architect for not less than seven years, he would now require, over and above these academic qualifications and experience which is reduced to five years, the acquisition of experience in any of the specified fields as would be considered sufficient in the opinion of the Board for such appointment.

11. We have, therefore, to consider as to whether the decision can be impugned on any of the grounds sought to be urged before us by the learned advocate for the petitioner. It is no doubt true that the petitioner continues as a valuer under the Wealth-tax Act and the Central Government has not thought it fit to derecognise him. It is equally true that the appointment of the petitioner as an approved valuer under the Estate Duty Act was renewed in June, 1975, for a further period of five years which expired somewhere in June, 1979. Unless, therefore, the respondents can satisfy us by sufficient material brought on the record that the petitioner does not possess the qualification and experience which are now prescribed under the subsequent notification of August, 1975, it would be difficult for us to sustain the impugned decision. It cannot be gainsaid that the satisfaction of the Board as to whether a candidate possesses sufficient qualifications and experience is not purely subjective satisfaction but is one of objective facts. If it can be shown that the circumstances do not exist or that they are such that it was impossible for any one to form an opinion therefrom suggestive of the prescribed objective conditions, the opinion is challengeable on the ground of non-application of mind or perversity or on the ground that it was formed for a collateral purpose and was beyond the scope of the statute (see Barium Chemicals Ltd. v. Company Law Board [1966] 36 Comp Cas 639 (SC). The respondents also in their reply affidavit accept this portion that the satisfaction of the Central Government about the qualifications and experience is not purely subjective satisfaction but is a satisfaction on objective conditions and the decision is subject to judicial scrutiny on permitted grounds.

12. We will therefore, deal with the three contentions cumulatively without going in to the merits thereof individually. The reason which has been given by the Central Government for the impugned decision in its letter of September 12, 1983, is in the following terms :

'the requisite conditions as laid down in para. (I)(ii)(B) of annexure I of the Estate Duty Notification No. 300/355/74-ED dated 1st August, 1975, are not satisfied by you. In the opinion of the Board you have not been found fit for appointment as a valuer under section 4(3) of the Estate Duty Act, 1953'.

13. We must state our dissatisfaction and express our disapproval about the way in which reason has been assigned in support of the impugned decision as conveyed to the petitioner in the aforesaid letter. It is in most general terms and, therefor, very vague and imprecise. In the reply affidavit also, no worthwhile attempt has been made to particularise and elucidate as to how and in what respect the petitioner has failed to satisfy the requisite conditions. The only whisper in this direction made in the reply affidavit is also very vague and imprecise and without any particulars. It has been, inter alia, stated in paragraph 8 of the reply affidavit that the reports of the petitioner had been questioned and it was found that there was understatement in the valuations which has caused serious prejudice to the Revenue. The learned advocate for the petitioner was, therefore, perfectly justified in urging that the entire decision is based on extraneous considerations. Merely because the report or reports of a valuer is/are question, it cannot be said from that fact alone that the person seeking renewal and for that matter appointment does not satisfy the requisite qualification or experience. Unless the appointing authority is satisfied that for want of knowledge of the first principles in the field of valuation of buildings and urban lands or the quantity surveying or the knowledge of architectural or structural designing of buildings or town planning or the knowledge of construction of building or development of land, there is serious prejudice to the Revenue, the authority cannot refuse to renew the appointment. It is not the case pleaded on behalf of the respondents that the petitioner lacked the knowledge of the first principles or his report disclosed that he did not possess sufficient knowledge in the specified fields so as to justify the impugned decision. We have been surprised to read the averment in the reply affidavit that since several recognised tests have been evolved for valuation of immovable properties, guidelines are issued in that behalf and the judgments have been pronounced on the subject, there cannot be any variation in the matter of valuation. It is no doubt true that the valuer is expected to adopt proper valuation methods so that the judicial or quasi-judicial or quasi-judicial authorities requiring to examine them do not find difficulty in deciding about the propriety of valuation of the properties. Not a words has been stated in the entire reply affidavit that in the reports of valuation submitted by the petitioner, he had failed to adopt proper valuation methods or erred on known or recognised principles of valuation. It is no doubt true he was called upon to furnish the details and particulars of valuation of the properties which he had undertaken in the course of the assessments under the Wealth-tax Act as well as the Estate Duty Act and, therefore, he furnished all the necessary particulars in that behalf. Out of as many as 27 valuation works which he had undertaken as specified in annexure 'A' to his letter dated February 26, 1982, and out of about 22 cases in which he represented assessees before the different authorities or the valuation cell, except one property, namely, property by name Borsali, belonging to Smt. Indumati Chimanlal, not a single other case where his valuation was challenged and not accepted by the higher authorities in appeals has been pointed out from correspondence or from the reply affidavit and much less in a substantial number of cases, his valuation estimates were challenged and which resulted in prejudice to the Revenue. Even in respect of the solitary case of the property of Borsali, the valuation made by the petitioner was found by and large acceptable by the Appellate Tribunal with slight modification. What we find from the particulars given in respect of this property, Borsali is otherwise. We carry an impression that the valuation made by the valuation cell has been found to be highly exaggerated and was rejected by the Commissioner as well as the Tribunal. No doubt, the Tribunal had not accepted the valuation made by the petitioner in toto and addition to the extent of 15% has been made in the valuation. We are afraid, however, to draw any inference from this slight modification which has been made by the Tribunal and to come to a conclusion and agree with the respondent that the valuation made by the petitioner in cases undertaken by him were very much underestimated resulting in serious loss to the Revenue. Even in respect of the property known as Borsali, neither the appointing authority nor the Income-tax Officer had called for any explanation from the petitioner to substantiate his valuation or pointing out the defects therein. It has not been pointed out to us either in the reply affidavit or by production of the order of the Tribunal to show that the valuation of the petitioner in respect of the said property was such that it can be safely inferred that he lacked in understanding or in the comprehension of the correct principles of valuation. In any case, no opportunity was given to the petitioner to show and satisfy as to how he was justified in the conclusion which he reached in valuing the said property. Everything said and done and even if it is found that the valuation made by the petitioner in respect of this property was not satisfactory, even then, it would be too tenuous a material on which it can be safely assumed from the mere fact of the variation in the valuation ultimately that the petitioner lacked sufficient experience in the specified fields. In that view of the matter, we must hold that the impugned decision is vitiated on all the three grounds and, therefore, the petition should be allowed.

14. The result is that this petition succeeds and the impugned decision of the Union Government contained in the letter of September 12, 1983, is quashed and set aside and it is directed that the Union Government shall dispose of the application of the petitioner latest by March 31, 1985, according to the correct principles of law. Rule is made absolute accordingly but having regard to the facts and circumstances of this case, there should be no order as to costs.


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