1. The petitioner in these proceedings have challenged notices issued under s. 17(1) of the W.T. Act seeking to reopen the wealth-tax assessments of the petitioner for the assessment years 1971-72, 1972-73 and 1973-74. The notices are in respect of two plots of land owned by the petitioner in Krishnanagar area in Bhavnagar. He was the owner of plot No. 147 for all the three assessment years in question and another plot, No. 1939A, was purchased after the valuation date relevant to the assessment year 1971-72 was passed and we are concerned with plot No. 1939A only for the assessment years 1972-73 and 1973-74. For each of these three years the assessee, the petitioner herein, had submitted wealth-tax returns and along with the wealth-tax returns for each of the three assessment years, valuation reports of a registered and approved valuer, who is approved by the Government of India, was submitted to the WTO. The returns were accepted by the WTO and assessment orders were passed in respect of each of these three years. Thereafter, notices under s. 17 of the W.T. Act were issued on June 13, 1975, for each of the three years and in each case the notice stated that it had come to light that the valuation of the plot concerned was not made on the basis of the market value of land prevailing in the relevant year. The under-valuation proceeded from the fact that in the case of plot No. 147 for two of the assessment years, valuation was taken at Rs. 17 per square yard whereas, according to these impugned notices, the plot was worth Rs. 45 per square yard. In the case of plot No. 1939A, valuation was taken on the basis of Rs. 25 per square yard which was actually the purchase price paid by the petitioner at the time when he purchased this plot of land, but, according to the WTO, in the impugned notices, plot No. 1939A was also worth Rs. 45 per square yard. In each of the three notices the WTO stated :
'I have, therefore, reason to believe that by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, wealth chargeable to tax has escaped assessment.'
2. In the impugned notices the ground for reopening the assessment was not the ground of information received by the WTO but it was on the footing of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Thus, the ground which was sought to be made out in the impugned notices was under s. 17(1)(a) of the W.T. Act and not under s. 17(1)(b) of the W.T. Act. However, when the notices were challenged and the writ petition was admitted, in the affidavit-in-reply by the WTO, in paragraph 6, it has been stated that it had come to the notice of the WTO that the prevailing market value of the land in the area was Rs. 45 per square yard and on this basis the matter was sought to be reopened. In paragraph 11 it has been stated that the challenge of the petitioner was misconceived inasmuch as the respondent had invoked the provisions of s. 17(1)(b) of the W.T. Act and not s. 17(1)(a) as was contended. The WTO came to know the under-statement of valuation only through the means of audit objections and in the course of assessment proceedings. The information thus being available after completing the assessment, the WTO was perfectly justified in law in reopening the assessment. These are the grounds on which the WTO sought to reopen the assessment for the three years in question.
3. Under s. 17(1)(a) :
'If the Wealth-tax Officer -
(a) has reason to believe that by reason of the omission or failure on the part of any person to make a return under section 14 of his net wealth or the net wealth of any other person in respect of which he is assessable under this Act for any assessment year or to disclose fully and truly all material facts necessary for assessment of his net wealth or the net wealth of such other person for that year, the net wealth chargeable to tax has escaped assessment for that year, whether by reason of under-assessment or assessment at too low a rate or otherwise',
he may within eight years serve, on such a person, a notice containing all or any of the requirements which may be included in a notice under sub-s. (2) of s. 4, and may proceed to assess or reassess such net wealth, and the provisions of the Act shall, so far as may be, apply as if the notice had been issued under that sub-section. So far as s. 17(1)(b) is concerned, a closed assessment can be reopened if the WTO has, in consequence of any information in his possession, reason to believe, notwithstanding that there has been no such omission or failure as is referred to in clause (a), that the net wealth chargeable to tax has escaped assessment for any year, whether by reason of under-assessment or assessment at too low a rate or otherwise under s. 17(1)(b) within four years of the end of the assessment year in question. Though in the impugned notices and the reasons which accompany the impugned notices the reason to believe was under s. 17(1)(a), ultimately when it comes to the affidavit-in-reply, the respondent-WTO seeks to rely on s. 17(1)(b) and seeks to say that because he had information that another plot in the area, namely, Krishnanagar, where the two plots Nos. 147 and 1939A are located, was worth Rs. 45, he had reason to believe from such information as derived from the other assessment that the net wealth chargeable to tax had escaped assessment for that particular year, whether by reason of under-assessment or assessment at too low a rate or otherwise. In our opinion, the only information which was available to the WTO, as appears from the affidavit-in reply, was that some plot in Krishnanagar area was valued at Rs. 45 per square yard in some other assessment proceedings. There is no material before us and there was no material before the WTO, as appears from the affidavit-in-reply, as to where exactly the plot worth Rs. 45 per square yard was located as compared to the plots of the petitioner, secondly, what was the exact, situation of that particular plot of land valued at Rs. 45 per square yard, and all other facts which go into the valuation of immovable property. We are informed at the Bar that Krishnanagar in Bhavnagar is a very large area and unless the co-relations of the two plots are indicated and proximity or otherwise of the two plots is shown, the WTO would not be in a position to say that there was reason to believe on the information supplied to him that the net wealth chargeable to tax has escaped assessment or was under-assessed.
4. The principles on which proceedings under the W.T. Act or the I.T. Act can be reopened are now well settled. In Bai Aimai Gustadji Karaka v. GTO : 99ITR257(Guj) , this court was concerned with reopening of assessment in a gift-tax case. P. D. Desai J., speaking for the Division Bench, of which I was a member, observed at page 262 :
'Now, the true meaning and content of the word 'information' in the context in which it occurs in section 16(1)(b) has already been adverted to earlier. Accordingly,' information' means instructive knowledge concerning a matter bearing on the assessment received from an external source after the completion of the original assessment. The 'information' may be as to the correct state of facts or of facts or of law relating to taxable gift and it must be capable of arousing or suggesting ideas or notions not existent before in the mind of the recipient. In other words, it must be of such a nature as to acquaint, enlighten or instruct the mind of the Gift-tax officer for the first time concerning a matter pertaining to the taxable gift so that he could form a reasonable belief that there has been an escapement of tax which requires to be set right by taking steps for reopening the assessment. 'Information' in the context in which it is used in section 16(1)(b) must, therefore, be derived from a source which has some authenticity and it must be precise and certain and must have relation with the taxable gift which is alleged to have escaped assessment. Any wayside gossip, any inference or surmise drawn by a person from certain facts which are assumed to exist and not supported by any data or any general opinion expressed by a person not qualified, experienced or acquainted with the subject-matter, cannot amount to 'information' on which the Gift-tax Officer might act for reopening a completed assessment. It must be remembered that, section 16(1) empowers the Gift-tax Officer to disturb the finality of an assessment already made and to assess or reassess the taxable gift made by an assessee. Such an action is bound to result in considerable anxiety and harassment to the assessee and the legislature has, therefore, imposed certain conditions, subject to which alone, the Gift-tax Officer can reopen an assessment which is already concluded. These safeguards would be rendered illusory unless the word 'information' is given the aforesaid meaning in the context of section 16(1)(b).'
5. At page 264 it was observed :
'A bare opinion of the Inspecting Assistant Commissioner based on generalisations in respect of the value of properties in a particular locality and not related precisely to the value of the taxable gift which is alleged to have escaped assessment, would not, in our opinion, constitute 'information'.'
6. The language of s. 16(1)(b) of the G.T. Act is identical with and in pari materia with the language of s. 17(1)(b) of the W.T. Act and what has been stated in the context of gift-tax would apply with equal force in the context of the W.T. Act.
7. In ITO v. Lakhhmani Mewal Das : 103ITR437(SC) , the Supreme Court was concerned with a notice under s. 147 of the I.T. Act and Khanna J. speaking for the Supreme Court, has pointed out at page 448 of the report :
'The powers of the Income-tax Officer to reopen assessment, though wide, are not plenary. The words of the statute are 'reason to believe' and not 'reason to suspect'. The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income-tax officer in the present case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latter's failure or omission to disclose fully and truly all material facts was missing in the case. In any event, the link was too tenuous to provide a legally sound basis for reopening the assessment.'
8. Again, what has been observed in the context of income-tax law will apply to the provisions of s. 17 of the W.T. Act as well. In Sheo Nath Singh v. AAC : 82ITR147(SC) , Grover J., speaking for the Supreme Court, has pointed out (p. 153) :
'The words 'reason to believe' suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court.'
9. In the instant case, in the first instance, there is this difference between the reasons for issuing of the notices for reopening of assessment and the affidavit-in-reply. The reason proceeded on the footing of s. 17(1)(a), whereas the affidavit-in-reply proceeded on the basis of s. 17(1)(b). Moreover, the only information which he had was that in some other assessment proceedings relating to a plot in the area of Krishnanagar, the valuation had been placed and assessed at Rs. 45 per square yard. There was, to put in the words of Khanna J., in ITO v. Lakhmani Mewal Das : 103ITR437(SC) , 'too tenuous a link to provide a legally sound basis for reopening the assessment'. No reasonable person could have thought, on the material before the ITO, that there was reason to believe on that information alone that the net wealth had escaped assessment or that there was under-assessment in respect of the earlier years. Reason to suspect or to entertain a suspicion that the earlier assessment orders were not correct or that there was under-assessment in the earlier years is not enough and, hence, the condition precedent for the exercise of jurisdiction by the WTO before reopening an assessment which had already been completed for the assessment years 1971-72, 1972-73 and 1973-74 did not exist and this special civil application is, therefore, allowed and the notices, annexs. H1, H2 and H3 to the petition, are quashed and set aside. Rule is made absolute accordingly. The respondent will pay the costs of this special civil application to the petitioner.