G.M. Lodha, J.
1. Evasion, avoidance or tax dodging has always posed a perennial problem for the revenue. The Direct Taxation Enquiry Committee, headed by Chief Justice K. N. Wanchoo, suggested latest ways andmethods, to plug loopholes of law for removing the above. Section 16A of the W.T. Act was precisely introduced in the Amendments of 1972 for counteracting the evasion of tax by undervaluation of wealth. An alleged evaluation of the working of this section by the alleged absence of its proper use during assessment and reassessment has itself been alleged to have resulted in undervaluation of the provision itself. Its use as a weapon for reopening under Section 17 has resulted in this litigation; the assessee's contention being that this is a misuse of Section 16A by the revenue and beyond jurisdiction. This bunch of 11 writ petitions are aimed at closing the deep openings in Section 16A by reopening notices of Section 17 and further penetrating the very existence of jurisdictional facts of 'reason to believe' under Clause (a) and 'information' under Clause (b) of Sub-section (1) of Section 17 of the W.T. Act (for short, 'the Act' hereafter).
2. The two sisters, Anandkumari and Nawal Kanwar, have filed them. The first five, D. B. Civil Writ Petitions Nos. 265, 321, 322, 323 and 324, were filed in 1978 by Kanwarani Anandkumari, wife of Brig. B. Lall against the notices dated March 4, 1978, issued to her by the WTO, A-Ward, Jodhpur, under Section 17 of the Act for reopening the assessments for the years 1969-70, 1972-73, 1970-71, 1971-72 and 1973-74, respectively. The other six writ petitions being D. B. Civil Writ Petitions Nos. 315 to 320 of 1978 relate to the notices dated March 7, 1978, for reopening under Section 17 issued to Smt. Kanwarani Nawal Kanwar by the WTO, A-Ward, Jodhpur.
3. Anandkumari became the victim of a murder during the pendency of the writ petitions and, therefore, her husband, Brig. B. Lall. is now the petitioner in the first bunch of five cases.
4. Out of the 11 writ petitions, the following eight writ petitions relate to the validity of notices for the reopening of the assessments of wealth-tax on the basis of the alleged report of the Valuation Officer :
S. No.PetitionerPetition No.Assessment YearProperty situate atNotice dt. u/s.
1.Brig. B. Lall265/781969-70' Showrooms ' M. I. Road,Jaipur, Rajasthan17(l)(a) 4-5-782.do.321/781972-73do.do. do.3.do.322/781970-71do.do.do.4.do.323/781971-72do.do.do.5.do.324/781973-74do.do.do.6.Nawal Kamvar315/781972-73Ratanada flats, Jodhpur, (Raj.) 17(l)(b)7.do.317/781974-75do.do.8.do.319/781973-74do.do.In the following three writ petitions, the earlier assessments are sought to be reopened on the basis of the revenue audit report-cum-objections of the department :9.Nawal Kanwar316/781970-71Ratanada flats, Jodhpur, Rajasthan 17(1)(a) 7-3-78 10.do.318/781969-70do.do.do.11.do.320/781971-72do.do.do.
5. The brief facts of D. B. Civil Writ Petition No. 269 of 1978 may now be mentioned. Late Anandkumari, wife of Brig. B. Lall, residing at Sunset View, Opposite Central School, Ratanada, Jodhpur, furnished her wealth-tax return for the assessment year 1969-70, under Section 14 of the Act to the WTO, A-Ward, Jodhpur, on June 29, 1970, in the status of 'individual' in the prescribed manner, setting forth her net wealth as on the valuation date, i.e., April 1, 1969. This return was accompanied by a statement of wealth declaring a total wealth of Rs. 1,64,631 as on April 1, 1969.
6. The valuation of three show-rooms situated at M. I. Road, Jaipur, which are jointly owned by the petitioner and her sister, Nawal Kanwar, and in which the petitioner has got half share, was got done by a registered valuer. As per his valuation certificate and a detailed valuation report dated August 4, 1969, the said show-rooms was valued at Rs. 1,84,000 and, therefore, the petitioner's share was of the value of Rs. 92,000. In this return, the petitioner valued her plot of land and two flats, Golf Links, Jodhpur, at Rs. 17,000 and Rs. 40,000, respectively.
7. During the course of the assessment proceedings, the valuation report and the valuation certificate of the approved valuer were submitted. The WTO assessed the net wealth of the assessee for the assessment year 1969-70, after notice was given to the petitioner under Section 16(2) of the Act and after the case was discussed with her authorised representative. The assessment order dated December 21, 1971, contained the computation ofthe total wealth of the petitioner at Rs. 1,74,131 in which, the valuation of the property at Jaipur of the petitioner, as per the valuation certificates and report, was accepted at Rs. 92,000. In respect of the valuation of the immovable property at Jodhpur, non-petitioner No. 1 increased the price of the land by Rs. 3,000 on the ground that the valuation of open land was going up every day. The value of the gallery was also increased. Thus, after an intelligent and conscious application of the mind, the WTO assessed the petitioner and while doing so, accepted the valuation of the Jaipur property and the Jodhpur flats as per the valuer's report and certificate.
8. On March 4, 1978, the WTO issued notice to the petitioner-assessee under Section 17 of the Act wherein it has been stated, inter alia, that he had reason to believe that the petitioner's net wealth chargeable to tax for the assessment year 1969-70 had escaped assessment within the meaning of Section 17 of the Act, and, therefore, he proposed to reopen the said net wealth which had so escaped assessment.
9. On March 31, 1978, the petitioner filed a reply to the impugned notice and, inter alia, challenged the jurisdiction of the non-petitioner No. 1 to issue the impugned notices on the ground that the condition precedent for taking such action under Section 17 of the Act were not present and were nonexistent. It was pointed out that the petitioner had fully and truly disclosed all material facts necessary for assessment and the approved valuer's reports were accepted after due consideration and discussion and the application of mind and, therefore, the assessment could not be reopened. The non-petitioner No. 1 gave a reply by letter dated April 6, 1978, mentioning that the Jaipur property of the petitioner had been referred to the valuation cell for determination of the fair market value.
10. As soon as this reply was received, the petitioner filed the writ application on May 6, 1978, challenging the notice for a reopening of the assessment on the ground that the petitioner had made true and full disclosure of all material facts and the WTO, after full consideration of the case, accepted the approved valuer's report and the certificate about the valuation of the Jaipur property and no conditions precedent for the exercise of jurisdiction under Section 17 of the Act existed nor there was an iota of material on which the WTO could come to the belief that the wealth of the petitioner-assessee had escaped assessment.
11. This writ petition came up for hearing before this court earlier and at that time, the learned counsel for the respondents prayed that since reply had not been filed by them so far, the other bunch of cases of Nawal Kanwar for which replies had been filed earlier may be ordered to be listed with these cases and the arguments may be heard with them. This prayer was accepted.
12. During the course of hearing, the non-petitioner has also filed reply which is supported by the affidavit of Mr. K. V. Singh, the WTO, A-Ward, Jodhpur, as document Ex. R-1. According to Ex. R-l, which is a copy of the order sheet on the basis of which notice under Section 17 has been issued, it transpires that the valuation officer of the department valued the property of the assessee at M.I. Road, Jaipur, at Rs. 4,11,000 as on April 1, 1974. The share of the assessee came to Rs. 2,05,000 as on April 1, 1974, and, on this basis, the WTO estimated the value of the property and the assessee's half share at Rs. 1,95,000. On this basis, the WTO observed that he had reason to believe that wealth to the extent of Rs. 1,03,000 had escaped assessment.
13. In the reply to the writ petition, the respondent has submitted that the valuation of the property made by the petitioner in her return was grossly inadequate and since the WTO assessed the wealth on the basis of the return, the wealth escaped assessment. It was asserted that the WTO had sufficient reason to believe that the assessee has not disclosed truly and fully the material facts and due to that, the wealth had escaped assessment. As per the counter filed by the respondent, the reopening of the petitioner's case is sought to be done under Section 17, Sub-section (1), Clause (a), of the Act.
14. It was also submitted that the petitioner has got a remedy against the reassessment under the provisions of the Act and, therefore, resort to the extraordinary jurisdiction of this court cannot be allowed.
15. In all the cases of Anandkumari, the facts are identical except that the assessment year and the financial year have changed. These cases of Anandkumari, in which by notice dated March 4, 1978, under Section 17(1)(a) of the Act (sic) the assessments done for the assessment years 1969-70, 1970-71, 1971-72 and 1973-74, thus arise on identical set of facts.
16. Nawal Kanwar furnished her wealth-tax returns for the assessment year 1972-73 under Section 14 of the Act to the WTO, A-Ward, Jodhpur, on June 26, 1972, in the status of 'individual', in the prescribed manner and prescribed form setting forth her net wealth as on the valuation date, i.e., March 31, 1972. This return was accompanied by a statement of wealth declaring a total wealth of Rs. 2,93,201. So far as the three show-rooms situated at M.I. Road, Jaipur, are concerned, she also filed the valuer's report and valued her share at Rs. 92,000. The valuer's report dated August 4, 1969, was also filed. She valued her Ratanada flats, Jodhpur, at Rs. 1,16,000 as per valuation certificate dated November 7, 1968, of approved valuer, Shri H. R. Sahgal. The other property consisting of her deposits in the banks, shares of Hira Crushing Private Ltd., annuity deposits, etc., were also mentioned. The WTO assessed the net wealth of the petitioner for 1972-73 after giving notice to her under Section 16(2) of the Act and after discussing the case with her authorised representative and computed the total wealth at Rs. 3,30,830, vide his assessment order dated 'nil'. The valuation of the Ratanada fiats and the Jaipur property were accepted after applying his mind and after considering the valuation report of the approved valuer.
17. The WTO by his notice dated March 7, 1978, issued to the petitioner, Nawal Kanwar, has mentioned that he had reason to belive that the petitioner's net wealth chargeable to tax for the assessment year 1972-73 had escaped assessment and, therefore, he proposed to reopen the said assessment. A reply dated March 31, 1978, was filed by the petitioner, inter alia, challenging the jurisdiction of non-petitioner No. 1 to issue the impugned notice on the ground that the conditions precedent for taking action under Section 17 of the Act were not present. It was asserted that the petitioner had fully and correctly disclosed all material facts necessary for assessment and the approved valuer's reports were accepted by the WTO at the time of the original assessment and there was no iota of evidence to suggest that the value was incorrect and that being so, the assessments could not be reopened on a mere change of opinion.
18. The non-petitioner No. 1 gave a reply to the above by letter dated April 14, 1978 and stated, inter alia, that the Jodhpur property consisting of Ratanada flats of the petitioner had been referred to the valuation cell for valuation and there was nothing illegal in reopening the assessment under Section 17 of the Act.
19. After the above reply of the revenue, the petitioner filed the writ application on May 19, 1978.
20. The respondent has filed a reply to the writ petition controverting the above facts and this reply is supported by the affidavit of Shri G. S. Gopala, WTO, and a copy of the order dated March 7, 1978, Ex. R-1. According to this, Ex. R-l, the value of the immovable property of Ratanada flats., Jodhpur, was declared by the assessee at Rs. 1,16,000 and was assessed as such. This property was referred to the valuation cell and this valuation cell of the department has assessed its value at Rs. 2,48,000 and thus, the net wealth chargeable to assessment has escaped assessment for Rs. 1,32,000 for the year 1972-73. The case is, accordingly, reopened under Section 17(1)(a) of the Act.
21. In the reply which has been filed by the non-petitioner, it has been mentioned that the petitioner undervalued her property in her return of wealth-tax and, therefore, it was not correct. The WTO, therefore, had reason to believe that the petitioner had not made a true and full disclosure of the facts and on account of this, the net wealth of the petitioner had escaped assessment.
22. Though no rejoinder has been filed, during the course of arguments, the petitioner has also submitted the copy of the notice dated January 12, 1977, received by her under Section 16A(4) of the Act and also filed a copy of the order under Section 16A(5) of the Act dated June 21, 1977.
23. The facts of the other cases of Nawal Kanwar in Writ Petition No. 317 of 1978 for the assessment year 1974-75 and Writ Petition No. 319 of 1978 for 1973-74 are identical except that the notices for reopening given in these two cases are tinder Section 17(1)(b). In Nawal Kanwar's cases Nos. 316 of 1978 for the assessment year 1970-71, 318 of 1978 for the assessment year 1969-70 and 320 of 1978 for the assessment year 1971-72, the basis for reopening is the revenue audit of the department's and not the Valuation Officer's or valuation cell's report, as the cases in the other eight cases mentioned above and these cases fall in a different cagetory and would be dealt with by us at a later stage of this judgment.
24. It may be pointed out at the initial stage of this judgment that during the course of arguments which were made on three successive days, we have pointed out a number of times to the learned counsel for the revenue that the valuation officer or valuation cell report or audit report in respect of these properties' valuation may be very material and, in any case, have got great relevancy and bearing on the issues of controversy involved in these writ applications and, therefore, unless the revenue wants to claim privilege or wants to withhold them for some specific important reasons, normally they should be produced in the court, but they were not produced on record.
25. The first and the foremost contention of the learned counsel for the petitioners is that Section 16A can be invoked only for the purpose of making an assessment and this assessment can include the proceedings of reassessment also after the same has already been initiated but excludes the proceedings where the assessment is complete and such assessment has also not been reopened under Section 17 so far. Our attention was invited to the language of Section 16A, relevant provisions of which are as under :
'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--...
(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.'
26. The learned counsel for the revenue, on the contrary, submitted that no such limitations and fetters, as argued by the learned counsel for thepetitioners, can be seen in the language of Section 16A and the word 'assessment' is comprehensive enough to include all proceedings of assessment, reassessment and for reopening the completed assessment. According to him, proceedings for reopening under Section 17 of the Act are nothing but a continuation of the process of assessment and reassessment only.
27. It is common ground between the parties that all the five cases of Anandkumari and three cases of Nawal Kanwar mentioned in the chart (supra) are cases wherein the notices under Section 17 dated May 4, 1978, and March 7, 1978, are based on the valuation of the wealth consisting of the immovable property on the basis of the reference to the Valuation Officer under Section 16A of the Act.
28. The valuation report has not been filed by the revenue. Learned counsel for the revenue expressly mentioned that they are not privileged documents which can be withheld from the court but even then, though the hearing continued for more than three days and the judgment is being given after the lapse of sufficient time, the department has chosen to withhold these reports and deprive this court of the benefit of perusing them for such use as the circumstances may warrant. Not only this, the learned counsel for the revenue objected to the production of the reports of the Valuation Officer by the assessee-petitioners also on the ground that none was produced with the writ application and if now the same is taken in evidence, he would be deprived of the opportunity of contesting its genuineness.
29. We have not been able to appreciate the withholding of the Valuation Officer's reports from the court and objecting to the production of the same by the petitioners because if the same would have been there before us, it would have been easy and convenient to ascertain and adjudicate, though prima facie only, whether the earlier figures of wealth about the valuation of the concerned immovable properties of the petitioners were incorrect and whether the reasons for the difference in valuation of the same property for the same period was due to a change in the method of assessment of value or due to concealment by the assessee of some apartments or quality of construction or due to the approved valuers adopting an incorrect standard for valuing the property or taking incorrect rents by concealing the real rents received from the property for the relevant years. It is true that these are questions which are required to be considered by the WTO during the reassessment and they can be gone into in detail only at that stage but none the less, for the purposes of deciding these writ applications, the data given in the valuation report would have provided us valuable assistance.
30. If, after the filing of reports, the counsel for the revenue would have submitted any objections, this court would have considered them anddecided them according to law. Again, if there were any objections against filing the same, in all fairness, the learned counsel for the revenue should have mentioned them before this court. In the absence of raising any objections to the filing of the same, the withholding of the valuation report and further objecting to its production from the other side has left the stand of the revenue unintelligible.
31. Be that as it may, the basic fact is not in dispute that after the assessments of the petitioners were completed, the WTO made a reference.
32. The docks are now clear to examine the correctness of the submission of Mr. Mehta regarding the non-applicability of Section 16A for reopening of assessment under Section 17 of the Act. There is no doubt that the phrase used in Section 16A is 'for the purpose of making an assessment'. The definition of assessment contained in Section 2(ca) shows that it includes reassessment. It defines assessment as 'assessment includes reassessment'. On a plain reading of the definition of assessment, the proceedings for reopening of completed assessment cannot be treated as inclusive.
33. It is to be noted that on this important question, learned counsel for the parties conceded that there is no judgment of the hon'ble Supreme Court which can provide sufficient guidance. It appears that this point has not been raised even before the High Courts frequently because the only judgment cited before us by Mr. Mehta is that of a single judge of the Calcutta High Court in Satyendra Chunder Ghose v. WTO : 126ITR102(Cal) . In the above judgment, it has been observed as under (pp. 110, 111):
'On the question of the jurisdiction of the WTO to refer the matter for valuation to the Valuation Officer, I must accept the contention of Mr. Bhattacharya. The language of Section 16A is 'for the purpose of making an assessment'. This would no doubt include reassessment but this contemplates a case where an assessment is not complete or final. It contemplates a case where no assessment has been made. It would also include a case where even after the assessment has become final, the matter has been reopened under Section 17 because that would also be a case of 'for the purpose of making an assessment'. It will not certainly include a case where the assessment is complete and such assessment has not been reopened under Section 17I cannot accept the contention of Mr. Sengupta that this would also include a case where though the assessment is final and though the matter has not been reopened, yet the power is being exercised only in order to find out whether the assessment should be reopened under Section 17 or not. It is not necessary for me to decide whether any enquiry can be made for the purpose of deciding as to whether to reopen a case under Section 17 or not. But for that purpose without reopening a case under Section 17 a reference cannot be made under Section 16A. This position would also be made clear from sub- Section (6) of Section 16A. The scheme of the Act is that there is a reference unders. 16A by the WTO to the Valuation Officer. Thereafter, under Sub-section (2) the Valuation Officer issues a notice for production of documents, etc. Then two courses are open to the Valuation Officer. The Valuation Officer may either come to the opinion that the valuation has been correctly declared and in that case he shall pass an order in writing to that effect and send a copy of his order to the WTO and to the assessee. But when he does not form any such opinion that it has been correctly declared, then the course open to him is laid down is Sub-sections (4) and (5). For this purpose another notice is to be given by the Valuation Officer when he forms the opinion, inter alia, that the value of the asset is higher than the value declared in the return. At this stage, there is no final formation of opinion. After the procedure in Sub-sections (4) and (5) has been followed and order has been passed under Sub-section (4) this order has got to be sent to the WTO and to the assessee. Upon receipt of such valuation it is the duty of the WTO to complete the assessment in conformity with the estimate of the Valuation Officer. Sub-section (6) itself makes it clear that the purpose of making a reference under Section 16A(1) is in order to enable the WTO to complete the assessment. Therefore, it is clear that such a power of reference can be exercised only when the assessment is not complete. In a case where the assessment is complete and it has not been reopened, this power under Section 16A cannot be exercised by the WTO.'
34. We would first like to examine the legislative history of this section. Section 16A was introduced, vide Section 10 of the Taxation Laws (Amendment) Act, 1972, with effect from January 1, 1973. The Taxation Laws (Amend.) Act, 1972, which introduced Section 16A, had the following objects in view :
1. To counter evasion of tax through under-statement of the value of immovable properties in transfer deeds and also to check the circulation of black money, by empowering the Central Government to acquire immovable properties, including agricultural lands, at prices which correspond to those recorded in the transfer deeds ;
2. To curb the widespread practice of benami holding of property with a view to tax evasion by debarring the real owner from enforcing his claim to such property in a court of law unless he has declared the income from that property or the property itself for purposes of income-tax and wealth-tax or has given notice of his claim to the property to the I.T. authorities; and
3. To improve the present arrangement for the valuation, for the purpose of income-tax, wealth-tax and gift-tax laws, of buildings, lands and other assets, by augmenting the set up of the official valuation machinery and enhancing its powers on the one hand and by bringing about better regulation and discipline over the non-official valuers, on the other.
35. A new Section 12A was inserted in the Act to enable the Central Govt. to appoint as many valuation officers as it may think fit and the W.T. authorities to appoint as many overseers, surveyors and assessors as may be necessary to assist the Valuation Officer in the execution of their functions. This was followed by insertion of Section 16A enabling the WTO to refer the valuation of any capital asset to the Valuation Officer with a view to ascertain the market value of such asset for the purposes of assessment.
36. It may be recalled that a commission headed by ex-Chief Justice of India, Hon'ble Shri K. N. Wanchoo was appointed by the Govt. of India for the manifold purpose of suggesting the checks for tax evasion and for simplification of the tax laws and streamlining the machinery for its assessment and realisation. The amendment by the insertion of Section 16A was done as a result of the recommendations of this committee and the objects for the same have already been outlined above.
37. The functions of the Valuation Officer, as summarised by the revenue itself in para. 36 of its Circular No. 96 dated November 25, 1972* is as under:
'Functions of the Valuation Officer.--Where the valuation of an asset is referred to the Valuation Officer under Section 16A(1) of the Wealth-tax Act, he will proceed to deal with the matter in accordance with the provisions of Sub-sections (2) to (5) of Section 16A. If the Valuation Officer is of opinion that the value of the asset has been correctly declared in the return, he will pass an order in writing to that effect under Section 16A(3) and send one copy of the order to the WTO and another to the assessee. An order under Section 16A(3) may be passed without requiring the assessee to produce any evidence in this behalf. However, if the Valuation Officer so desires, he may serve on the assessee 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 he (Valuation Officer) may require and pass the order under Section 16A(3) after examining the evidence so produced. If the value of the asset in respect of which reference has been made by the Wealth-tax Officer has been declared in the return of net wealth and the Valuation Officer is of opinion that the value of the asset is higher than the value so declared, it will be incumbent upon him to serve a notice on the assessee intimating the value which he proposes to estimate and give him an opportunity to state on a specified date 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 assessee may rely on in support of his objections. A similar procedure will have to be followed in a case where the asset in question has not been disclosed or the value ofthe asset has not been declared in the return of net wealth or where no such return has been furnished. The Valuation Officer will also have the power to require the assessee to produce evidence on any specified points. The Valuation Officer will consider the evidence produced by the assessee as also all other relevant material gathered by him and make an order under Section 16A(5) estimating the value of the asset. One copy of this order will be sent to the Wealth-tax Officer and another to the assessee. The valuation made by the Valuation Officer will be binding on the Wealth-tax Officer and it will not be open to him to depart from the order of the Valuation Officer under Section 16A(5) in so far as it relates to the valuation of the asset in question. Since an appeal against the assessment order made by the Wealth-tax Officer will lie to the Appellate Assistant Commissioner, a copy of the Valuation Officer's order under Section 16A(5) should invariably be appended to the assessment order and made an integral part of the same.'
38. Rules were framed for providing appropriate machinery and procedure for giving effect to Section 16A and other relevant provisions of the W.T. Act, in respect of the valuation of wealth. The approved valuers who have been treated as registered valuers under these rules were required to give their valuation reports in the prescribed forms and the rules prescribing the various forms for valution of different classes of assets.
40. Rule 80 mentions various forms which are from Forms Nos. 0-1 to 0-10 and Form No. 0-1 is prescribed for immovabable property. New Sections 34AA and 34AB were inserted and the entire Chap. 7B of the W.T. Act relates to the registered valuers. Sections 23 and 24 make provision for appeals from the orders of the Valuation Officer and provides for procedure. Section 16 of the Amending Act amended Section 16 of the W.T. Act relating to the prosecution and this now includes the prosecution of registered valuers also in certain circumstances.
41. The above bird's eye-view of the scheme of the provisions of the amendments introduced on account of the Wanchoo Committee Report by the Act of 1972 would show that Section 16A was not introduced in isolation but it was part of the entire scheme of amendments which associated the Valuation Officer with the valuation of assets at the stage of assessment to wealth-tax and to put fetters and limitations on the authority of the WTOs in respect of making their own valuations after they have referred it to the Valuation Officer during the pendency of an assessment or reassessment. In spite of a very careful study of the relevant provisions and the rules about the conditions and circumstances in which a reference can be made to the Valuation Officer under Section 16A, we are unable to find out any provision or even remote legislative intent to arm the WTO with the powers to refer the question of valuation of property, in a completedassessment, after he has accepted the valuation of a registered valuer or otherwise of the assessee, simply for the purpose of finding out whether his suspicion that the completed assessment is based on under-valuation is correct, so as to enable him to create a ground for foundation either for a reasonable belief under Section 17(1)(a) or information under Section 17(1)(b) of the Act. In our opinion, that would tantamount to creating a ground and foundation for the belief without having it and inviting an information where none exists, by making such a reference. In either case, the reference in such circumstances would be based on a sort of roving or fishing enquiry for either confirming or removing his suspicions. This is not permissible under Section 16A of the Act and is completely ruled out on a bare and simple perusal and reading of the Section and also ruled out by the scheme of the Act.
42. The condition precedent or the pre-requisite conditions for providing jurisdiction to the WTO for making a reference to the Valuation Officer, as laid down in Section 16A are as under:
1. that the WTO wants to have the report of the Valuation Officer on the valuation of any asset for the purpose of making an assessment;
2. that this is required to be done because the value of the asset as returned in accordance with the assessment made by a registered valuer is, in the opinion of the WTO, is less than its fair market value ; or
3. (a) the WTO is of the opinion that the fair market value of the asset exceeds the value of the asset as returned by the assessee by more than such percentage of the value of the asset or more than such amount as maybe prescribed, or
(b) that having regard to the nature of other relevant circumstances, it is necessary so to do.
43. We are of the opinion that the foundation or bedrock of the jurisdic-tional facts necessary for giving jurisdiction under Section 16A is that the WTO must be seized of a return filed by the assessee containing valuation of his assets for which he is to apply his mind and adjudicate the valuation for completing the assessment. The situation contemplated in Clauses (a) and (b) of Sub-section (1) of Section 16A can be visualised only in a case of pending assessment and not a completed assesment. Once the assessment is completed and before the reassessment commences the WTO becomes functus officio for the purposes of Section 16A, as he is not in the process of completing any assessment, for the purpose of which he wants to check up from the Valuation Officer, the correctness of the valuation of the assets disclosed by the assessee in the return and which, according to him, are undervalued, looking to the fair market value or as per the standards laid down in Clause (a) or Clause (b) of Sub-section (1).
44. This makes the opening phrase 'for the purpose of making an assessment' extremely important and an opening gate through which and through which alone, the WTO can have access and approach to the Valuation Officer. The opening gate of Section 16A is wholly, solely and exclusively governed and contained in the phrase 'for the purpose of making an assessment' which, of course, can include the reassessment as per the definition of assessment as mentioned above.
45. Acceptance of the submission of Mr. Parakh would result in the addition of the words 'reopening of completed assessment' after the phrase 'for the purpose of making an assessment '. It is a well established and important principle of interpreting the statutes in relation to taxation that if a taxing provision is ambiguous and is reasonably capable of more than one interpretation, that interpretation which is beneficial to the subject must be adopted. Again, it is settled law that the court cannot read into a taxing provision any words which are not there or exclude words which are there. This view was expressed by the Supreme Court in CED v. R. Kanakasabai : 89ITR251(SC) .
46. Thus the phrase 'for the purpose of reopening of assessment' cannot be read by us into Section 16A. Yet another important principle in respect of interpreting taxing statutes is that unless the subject can be strictly brought to taxation by the express language of the statute itself, a tax cannot be levied or realised. To put it in strict legal terminology, the golden principle which has gained recognition for guiding the courts throughout the world for interpreting taxing statutes is that there is no scope for intendment in a taxation law nor can there be any tax by implication. In Alias Cycle Industries Ltd. v. State of Haryana : 85ITR121(SC) the Supreme Court gave recognition to the above golden rule of interpretation by holding that a taxing provision always receives a strict interpretation for the obvious reasons that there must be clear and express language imposing a tax and the date from which such taxes shall come into effect.
47. We have mentioned the above to emphasise that in spite of the amendment introduced by Section 16A, the revenue cannot use it for an enquiry to consider whether to reopen or not to reopen a completed assessment on the ground of alleged undervaluation of wealth. It may be that when we resort to strict and stringent interpretation of Section 16A, it may lead to consequences where the revenue may allege that there would be avoidance of some taxes. However, this is primarily for the consideration of the legislature and not of the court. Justice Shah in CIT v. A. Raman and Co. : 67ITR11(SC) said (p. 17):
'Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed, is not prohibited, A taxpayer maythe resort to a device to divert the income before it accrues or arisesto him. Effectiveness of device depends not upon considerations of morality, but on the operation of the Income-tax Act. Legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but it may lawfully be circumvented.'
48. Justice Jagadisan in Aruna Group of Estates v. State of Madras : 55ITR642(Mad) observed (p. 648):
'Avoidance of tax is not tax evasion and it carries no ignominy with it, for, it is sound law and, certainly, not bad morality, for anybody to so arrange his affairs as to reduce the brunt of taxation to a minimum.'
49. Justice Rand of America in Commissioner v. Newman (199 F. 2.848 (2d Cir., 1947) observed:
'Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor and all do right, for nobody owes any public duty to pay more than the law demands ; taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.'
50. Such avoidances have been supported from the observation of Lord Atkin in Duke of Westminster v. IRC  19 TC 490 (HL) at p. 511, wherein he observed :
' I do not use the word device in any sinister sense : for it has to be recognised that the subject, whether poor and humble or wealthy and noble, has the legal right so to dispose of his capital and income as to attract upon himself the least amount of tax. The only function of a court of law is to determine the legal result of his dispositions so far as they affect tax'
51. Of course, when such avoidances attain the stage of 'evasion ', the taxpayer will have to face the music of it and the courts would not provide any protection, because as Lord Greene observed :
' It scarcely lies in the mouth of the taxpaper who plays with fire to complain of burnt fingers'
52. These observations were made by Lord Greene in Howard de Walden v. IRC : 10ITR90(Cal)
' For years a battle of manoeuvre has been waged between the legislature and those who are minded to throw the burden of taxation off their own shoulders on to those of their fellow subjects. In that battle the legislature has often been worsted by the skill, determination and resourcefulness of its opponents.....' (observed Lord Greene at p. 94).
53. In the treatise on Tax Planning in India, published under the caption 'Adopt avoidance, avoid evasion' by Mr. S. C. Loonkar, he has made the following comment:
'Now, the tendency of our tax laws is more and more away from the 'sniper' approach to the 'shotgun' approach. The tradition of our laws of course prescribes the 'sniper' approach, as does the rule of law itself. But, baffled by the ingenuity of tax avoiders, who find some new hole in the fence and employ them, new tax laws are enacted to plug the loopholes and these laws give rise to new loopholes which generate and give momentum to the never-ending cycle. Governments and Parliaments have had more and more recourse to general provisions of the 'shotgun 'type. Further, if it appears that some form of avoidance can be countered only by the drafting of such extreme obscurity that it baffles the most acute legal minds, it is better to let the avoidance be as it is. Are the purity, reasonableness and precision of the law to be sacrificed to the mere passing need for revenue or to the largely ill-founded animus against the morality of avoidance?'
54. We have extracted above the various important quotations from the judgments of the eminent judges to fortify our view that the references to Section 16A for an enquiry as a prelude to reopening notice cannot be permitted unless the legislature expressly includes it in Section 16A itself or elsewhere under the W.T. Act by express amendment, as we are required to take a strict and stringent view in interpreting Section 16A.
55. The above extraction from the various judgments and observations of the eminent jurists and authors would further show that it is an undis-putedly established principle regarding interpretation of statutes that the court cannot make an amendment to the statute by additions of the words which are not there as that tantamounts to legislation, which is out of the scope of interpretation by court.
56. It is not for this court to hold that in the wisdom of the legislature, why the reference to Valuation Officer under Section 16A was not permitted for the purpose of considering the case for reopening under Section 17. It may be that the legislature in its wisdom wanted to provide some finality to the completed assessment because a completed assessment can always be challenged before a hierarchy of authorities by way of appeal, revision, reference, etc., under the provisions of the Act. If that is done, the question of assessment again becomes open before the appellate or revisional forums and in a given case, on proper proof of circumstances and facts, the appellate or revisional authority may direct the WTO to make assessment after taking resort to Section 16A after setting aside the assessment made in its absence. However, that situation is wholly different and the legislature might have thought that so far as the question of reopening of a completed assessment is concerned, it should be resorted to in very rare and extraordinary cases and if Section 16A is allowed to be used for that purpose, then the power of reopening may be used indiscriminately by making areference under Section 16A and that may lead to abuse and misuse of the power.
57. As we have already mentioned earlier, it is not for us to probe into the wisdom of the legislature as that is neither warranted by law nor would be a proper judicial exercise.
58. A further perusal of Sub-sections (2) and (3) confirms the view which we have taken about the scope of Section 16A. It pointedly shows that the Valuation Officer is entitled to examine the correctness of the valuation of the assets by calling the assessee and requiring him to produce accounts, records and other documents and then decide whether the value disclosed by the assessee is correct.
59. Sub-s. (6) of this section uses the phrase 'proceed to complete the assessment in conformity with the order under Sub-section (3) or Sub-section (5) of the Valuation Officer'. This clinches the issue raised before us inasmuch as the entire scheme of Section 16A consisting of Sub-sections (1), (2), (3), (4) and (5) ending with Sub-section (6) goes to show that the reference is made for the purpose of making an assessment and as soon as the reply is received by an order of the Valuation Officer under Sub-section (3) or Sub-section (5) the WTO has to complete the assessment in conformity with this order. A careful scrutiny of this Sub-section (6) of Section 16A categorically rules out the possibility of the jurisdiction of the WTO under Section 16A for the purposes of giving a notice for reopening under Section 17, Clause (a) or Clause (b) of Sub-section (1).
60. It should not be forgotten that once the reference is answered by the Valuation Officer, the WTO has got no option but to accept it and to pass an order in conformity with it. How can an order of assessment as contemplated by Sub-section (6) be passed after an assessment has been completed and before the same has been reopened We are, therefore, of the opinion that the pendency of an assessment including reassessment is a sine qua non for the reference and for giving jurisdiction to the WTO to make a reference under Section 16A of the Act.
61. It may be recalled that even before the statutory powers to the Valuation Officers by virtue of the amendment introduced by Clause 9 of Taxation Laws (Amendment) Act, 1972, the procedure for arbitration by valuers at the stage of Appellate Tribunal was provided. This provision and procedure has now been superseded and omitted. The new provision seemingly has been introduced for minimising the tax evasion on account of undervaluation of assets and it also provides appeal against the valuation made by the Valuation Officer. This appeal can be filed to the AAC and then to the Appellate Tribunal.
62. In substance, Section 16A curtails the jurisdiction of the WTO under Section 17(1) to ascertain the price of any asset. Once the WTO chooses to make a reference to the Valuation Officer, the valuation of the property made bythe Valuation Officer is to be accepted by the WTO. A combined reading of Sub-section (1) and Sub-section (6) of Section 16A would show that no discretion has been given to the WTO to reject or vary the report of the Valuation Officer. Contrary to it, if the WTO decides not to make a reference to the Valuation Officer, he will have no option but to accept the position that the returned value of the asset is not less than its fair market value. The limited enhancement is only permissibe under Clause (b) of Sub-section (1) of the section. Of course, the WTO can recall his order of reference but this can be done before the Valuation Officer starts functioning and then he has to follow either Clause (b) or Clause (c).
63. The Valuation Officer, according to the scheme of the new Section 16A, performs statutory duty in giving a report of valuation and the powers exercised by him are quasi-judicial and not administrative. This has been held to be so in the judgment of Wenger and Co. v. District Valuation Officer : 115ITR648(Delhi) . The Valuation Officer further has got all the powers vested in court under the Code of Civil Procedure, 1908, for the purposes of getting the account books or records produced, inspection and enforcing attendance by virtue of s, 37 of the Act. He has also got powers of entering any land or building or any other place by virtue of Section 38A of the Act.
64. We have summarised above the various features of Section 16A newly introduced in the Act in 1972-73, in order to consider the submission of Mr. Hastimal that even though the report of the Valuation Officer may not be admissible for consideration of reopening only under Section 16A of the Act, yet it must be treated as an administrative report to provide the foundation of a reasonable belief of the WTO under Section 17(1)(a) and for the information under Section 17(1)(b). The above analysis of Section 16A shows that not only the Valuation Officer's functioning and report is statutory but it is of a quasi-judicial nature amenable to challenge under Article 226 as per Wenger and Co,'s judgment : 115ITR648(Delhi) . We have, therefore, no hesitation in holding that apart from the other reasons given for rejecting this contention, the scheme of Section 16A in its entirety providing for appeals and finality is binding on the WTO and the provisions for giving of notice to the assessee before making the valuation and further provisions of giving the powers of the CPC the Valuation Officer for entry, inspection and calling of the record, etc., all lead to an inevitable and inescapable conclusion that such report can neither be termed nor be used as an administrative order or report. We are, therefore, firmly of the opinion that Section 16A has got no relevancy and cannot be applied after the assessment is complete and before reassessment has commenced, that is, for the purposes of consideration of the question whether a completed assessment can be reopened or not or in other words, to decide and consider the questionwhether the valuation accepted by the WTO was a case of wealth escaping assessment on account of undervaluation. Any reference made under Section 16A cannot lead to the reopening of a closed assessment under s, 17(1) as the report submitted by the Valuation Officer would be in an invalid reference and must be treated as a nullity in the eye of law, non est and void ab initio. Consequently, all the eight notices in these eight writ applications being based on the Valuation Officer's report obtained under Section 16A cannot be sustained and are liable to be quashed on this ground alone.
65. Thus, we are inclined to accept the contention of Mr. Mehta on a plain reading, analysis and discussion of the implications, both legal and logical of the various Sub-sections of Section 16A, the most important being Sub-section (1) and Sub-section (6) as mentioned above. Sub-section (1) provides the opening gate of jurisdiction and Sub-section (6) is the closing door of the same. In a case of mere consideration for giving or not giving notice under Section 17(1)(a) or (b) neither Sub-section (1) permits the entry or excess for invoking jurisdiction and that being so, the question of a closure under Sub-section (6) can never arise, because it would be a case of a 'still born child '.
66. Exhibit R-l order for issuing notices under Section 17 to the petitioners in all the above eight cases is based on the valuation report received under Section 16A of the Act wholly and solely. This report is non est as being without jurisdiction, illegal, null and void and, therefore, the entire fabric for reopening these proceedings falls flat and the impugned notices deserve to be quashed. The notices are based on an absence of the existence of any legal foundation which could have given rise to a valid belief or reason to believe, as contemplated by Section 17(1)(a) or could have provided information as contemplated by Section 17(1)(b) of the Act.
67. It can neither constitute information within the meaning of Section 17(1)(b) of the Act nor can it become a reason for the belief within the meaning of Section 17(1)(a) of the Act. These eight writ applications, therefore, deserve to be accepted on this short but surest ground as the notices, in view of our finding above discussed, are without any legal and valid foundation both under Section 17(1)(a) and (b) of the Act,
68. In Anandkumari's writ petitions Nos. 265 of 78, 321/78, 322/78 and 323/78 and 324/78, Ex. R-l is the basis, bedrock and foundation of the notice for the reopening dated March 4, 1978. Ex. R-l contained in Writ No. 265 of 78, relevant to assessment year 1969-70, is as under;
'Name of assessee Smt. Anand Kumarilal Ratanada, Jodhpur.G.I.R. No. A-7/WT/A/Ward, Jodhpur.Assessment year 69-70.
69. Originally this assessment was completed on a net wealth of Rs. 1,74,131. The assessee has a half share in the property (Three show rooms located at M.I. Road, Jaipur). The assessee declared her share in the property at Rs. 92,000. The Valuation Officer of the department valued the property at Rs. 4,11,000 as on 1-4-1974. The share of the assessee comes to Rs. 2,05,000 as on 1-4-1974. I have carefully gone through the report of the Valuation Officer. As per this report I estimate the value of this property and assessee's half share at Rs. 1,95,000. Thus, I have reason to believe that on account of failure and omission on the part of the assessee to disclose correct market value, wealth to the extent of Rs. 1,00,300 has escaped assessment.
70. Issue notice under Section 17 of Wealth-tax Act, 1957.
(Sd.) H. C. Shakarwal,
Wealth-tax Officer, A-Ward, Jodhpur.'
71. The above would show that the Valuation Officer under Section 16A has valued this property as on April 1, 1974. On the basis of the valuation done of the property as on April 1, 1974, the completed assessment of 1969-70, 70-71, 71-72, 72-73 and 73-74, are sought to be reopened. We enquired from Mr. Parakh, whether any principle, formula or any other rational basis was applied by the WTO in coming to the figure of valuation as on March 31, 1969, because Ex. R-l is conspicuously silent; itonly mentioned what was the valuation found by the Valuation Officer as on March 31, 1974, and then abruptly the WTO applied it to each individual year for the five years mentioned by making certain ad hoc deductions in each case. Mr. Parakh, in spite of his vehemence and ability exhibited otherwise during the arguments, had no answer to it and virtually conceded that no such principle or formula or basis can be found out and all that he can say is that suitable deductions have been made in each case for each year.
72. This results in an application of the 'rule of thumb' by the WTO in contradistinction to the rule of law and it is negation and non-application of mind, on any rational and legal basis. It is arbitrary, capricious and cannot be sustained. In the face of a specific provision of the W.T. Act, and the Constitutional guarantee of Article 265 that no tax can be levied without the authority of law, we cannot permit any authority having statutory or quasi-judicial powers to act as a 'Mughal Emperor' or a monarch of the medieval age whose every word fallen from the lips used to be law. Arbitrariness inherent in the rule of thumb is negation of justice and law. It is not intelligible why the WTO did not get the valuation done as on 31st March of every year because if he wanted to adopt the rental methods, the rent of the properties were available to him, in the income-tax returns, which were admittedly filed by both the assessees.
73. Contrary to it, if he wanted to adopt the method of valuation on the basis of the construction, the departmental standards for calculating costs of constructions on the basis of various tables or in the form of circulars issued from time to time were available in all Valuation Officer's offices.
74. The report which has been obtained for the year 1974 is not applicable to any of the five cases in terms. If any principle or formula would have been adopted by him for making deductions for every year, from the valuation report for 1974, then we would have considered whether that was just, reasonable, rational and legal, but since none has been adopted, it has to be declared 'as a rule of thumb' only which cannot be permitted. On this additional ground also, so far as the five cases of Anand-kumari's assessment are concerned, they cannot be allowed to be reopened and the impugned notices dated March 4, 1978, are liable to be quashed.
75. Mr. Hastimal, confronted with the above obvious obstruction and hurdle in the way of the reopening proceedings, lastly submitted that even if it is assumed that the Valuation Officer's report under Section 16A cannot be called for the purpose of consideration of reopening only, even then once it has come on the record of the WTO, he cannot be prevented from using it as an administrative or executive document and making it a reason for belief. This contention cannot be accepted for the simple reason that it is well-established law that if the law permits anything to be done in a particular manner or if it prohibits doing a thing in a particular manner, it cannot be allowed to be done in any other manner. The Supreme Court laid down in Narbada Prasad v. Chhaganlal, AIR 1969 SC 395, the above dictum in the following form (p. 397):
' It is a well understood rule of law that if a thing is to be done in a particular manner it must be done in that manner or not at all. Other modes of compliance are excluded.'
76. We respectfully follow the above principle of law enunciated by the Supreme Court and hold that since the valuation report under Section 16A cannot be obtained for the purpose of deciding the question whether a completed assessment should be reopened or not on the ground that Section 16A cannot be applied in such cases, the same cannot be used by an indirect process of treating it as a non-statutory administrative or executive document. This would be circumventing the provisions of Section 16A and permitting the same effect even after holding that under Section 16A neither this report can be called nor it can be used.
77. The net result of the above discussion is that in all the eight cases of category A, being D. B. Civil Writ Nos. 265, 321, 322, 323, 324, 315, 317 and 319, the notice dated May 4, 1978, and March 7, 1978, issued under Section 17 of the Act for reopening the completed assessments of the assessees for the years mentioned therein are quashed.
78. In the three writ petitions notices have been issued on March 7, 1978, to Nawal Kanwar under Section 17(1)(a) of the Act for reopening her assessment of 1969-70, 1970-71 and 1971-72, on the basis of the revenue audit report treating it as a ground 'for reason to believe' that wealth has escaped assessment, on account of non-disclosure of material facts, truly and fully.
79. The submission of Mr. Mehta, learned counsel for the assessee, regarding these cases is that audit reports of the department cannot be made the basis for reopening because neither the revenue audit is a statutory body nor this report can be treated as a legal document for forming the belief that income has escaped assessment. Reliance is placed on Indian and Eastern Newspaper Society v. CIT : 119ITR996(SC) wherein it has been observed as under (p. 1007):
' Therefore, whether considered on the basis that the nature and scope of the functions of the internal audit organisation of the income-tax department are co-extensive with that of the Receipt Audit or on the basis of the provisions specifically detailing its functions in the Internal Audit Manual, we hold that the opinion of an internal audit party of the income-tax department on a point of law cannot be regarded as 'information' within the meaning of Section 147(b) of the I.T. Act, 1961.'
80. The important question raised in these cases relates to the use of an audit note for the reopening of a completed assessment under Section 17 of the Act. This question has to be considered both in relation to the use of the audit note as information under Section 17(1)(b) and/or reason to believe that a true and full disclosure has not been made for the purpose of Section 17(1)(a) of the Act.
81. In the case of Muthukrishna Reddiar v. CIT : 90ITR503(Ker) a wrong deduction was made from the sale price of all the capital assets inasmuch as although the capital gains amounted to Rs. 30,000, the ITO taxed them only for Rs. 8,660, the audit report pointed out the same and it was used as information under Section 17(1)(b) and the reopening was upheld by the Kerala High Court. A similar use was permitted as information in CIT v. Chand Kanwarji : 84ITR584(Delhi) by the Delhi High Court where a bank deposit was wrongly treated as earned income. Again, in Vashist Bhargava v. ITO : 99ITR148(Delhi) the Delhi High Court upheld this use as information where the interest paid by the assessee to the credit of his own provident fund account was allowed as an expenditure incurred by the assessee on a wrong assumption of the fact that the provident fund vested in the Government.
82. However, an auditor, who gives a note that the valuation of the house property made by the officer under Section 7(1) of the Act was wrong, being based on the basis of rent capitalisation and that the higher value determined on land-and-building method should be adopted, exceeds his juris diction as in substance, he ventures to dictate to a WTO, who is a judicial officer, that his view on the disputable question of law was wrong and that the mistake should be corrected by taking action under Section 17(1)(b). The Madras High Court in Adityan v. First ITO : 52ITR453(Mad) has held that the simple duty of the audit is to point out mistakes which are clerical and arithmetical ones or those which involve undisputable provision of law or the settled judicial view and which are apparent from the record. This was the view taken in Justice Iqbal Ahmad, In re : 10ITR152(All) also.
83. In our opinion, revenue audit authorities, at the most could give their opinion but such an opinion cannot form the basis of treating it as information under Section 17(1)(b) as reopening can be done only in those matters about which definite, non-controversial and final decision of the court or an authority is available. A tentative information or an ad hoc view cannot be treated as information, as no completed assessment can be reopened light-heartedly.
84. The following observations of the hon'ble Supreme Court in CIT v. Simon Carves Ltd. : 105ITR212(SC) where the revenue's attempt to reopen a closed assessment under Section 147(b) of the I.T. Act was adversely commented upon, provide valuable guidance (p. 218):
'The taxing authorities exercise quasi-judicial powers and in doing so they must act in a fair and not a partisan manner. Although it is part of their duty to ensure that no tax which is legitimately due from an assessee should remain unrecovered, they must also at the same time not act in a manner as might indicate that scales are weighted against the assessee. We are wholly unable to subscribe to the view that unless those authorities exercise the power in a manner most beneficial to the revenue and consequently most adverse to the assessee, they should be deemed not to have exercised it in a proper and judicious manner.
The order made by the Income-tax Officer at the time of the original assessment was a legally correct order and was not vitiated by any error. The absence of an error in that order would justify the inference that the present is not a case of income escaping assessment. There is necessarily an element of error in cases of income escaping assessment mentioned in Section 147(b) of the Act of 1961. Such error resulting in income escaping assessment becomes manifest in the light of information coming subsequently into the possession of the Income-tax Officer. Where, as in the present case, the order making the original assessment was a legally correct order and was not vitiated by any error, the case would not be one which would fall within the ambit of Section 147(b) of the Act of 1961 or Section 34(1)(b) of the Act of 1922. We may add that the Income-tax Officer ordering reassessment does not sit as a court of appeal over the Income-taxOfficer making the original assessment. Nor is it open to the Income-tax Officer ordering reassessment to substitute his own opinion regarding the method of computing the income for that of the Income-tax Officer who made the original assessment, especially when the method of computation adopted at the time of original assessment was permissible in law. The fact that the adoption of a different method of computation would have resulted in higher yield of tax would not in such a case justify the reopening of the assessment.'
85. One of the exceptions to the above settled judicial opinion is the case of R. K. Malhotra, ITO v. Kasturbhai Lalbhai : 1975CriLJ1545 wherein on the undisputed facts, the audit note was taken to constitute such an information. The basic observations of their Lordships of the Supreme Court in that case were as under (p. 540):
'It is not in dispute that for determining the annual value of the house which is in the occupation of the owner, Section 23(2) of the Income-tax Act is applicable and that the assessee is not entitled to deduct the sum of Rs. 4,052 being the municipal tax.'
86. It may be mentioned now that the above discussion is in relation to the use of the audit report as information under Section 17(1)(b) and the earlier view of the hon'ble Supreme Court in R. K. Malhotra's case : 1975CriLJ1545 now stands altered by the subsequent judgment in Indian and Eastern Newspaper Society v. CIT : 119ITR996(SC) wherein it has been expressly held that information of an internal audit party of the ITO on a point of law cannot be regarded as information within the meaning of Section 147, Sub-clause (b) of the I.T. Act.
87. That being so, if such an audit report cannot be regarded even as information as discussed above for the purpose of Section 17(1)(b) where the limitation provided is eight years and the scope is very wide, it cannot certainly be made a basis for 'reason to believe' that the assessee has failed to disclose his wealth truly and fully, which has resulted in wealth escaping assessment, under Section 17(1)(a), W.T, Act also. This is so because in the case of valuation of immovable property based on the approved valuer's report, the amount of the market value, even after all is said and done, is a matter of estimate only based on different systems of valuation as discussed above.
88. It may be pointed out that apart from a bald mention of the audit report in Ex. R-l, the revenue has not produced either the audit report or relevant extract of it. It has not been shown what is the difference between the two valuations of wealth and what are the reasons for it. It is true that while considering the case under art, 226 of the Constitution in which a notice to reopen has been challenged, this court cannot go intothe adequacy or sufficiency of the grounds nor can it sit in appeal to judge the factual correctness or otherwise of those grounds at this stage. However, by a series of cases mentioned above commencing from the Calcutta Discount Company's case : 41ITR191(SC) and the later cases referred to above, it has been rightly held that the juris dictional facts or facts proving the existence of belief or information, as the case may be, for invoking Section 17(1)(a) or the Section 17(1)(b) should be proved before this court; once revenue is called upon to file a return in reply to a writ application and to show cause, the revenue cannot be allowed to rely upon an abstract doctrine of law nor can it be permitted to make a generalisation.
89. In Calcutta Discount Company's case : 41ITR191(SC) the Supreme Court observed that not only the court can but it is its duty to intervene and interfere in cases where the very existence of the belief or information is lacking as the assessees-citizens are entitled to claim protection from the courts. It has been respeatedly observed by the hon'ble Supreme Court that under our federal Constitution, a solemn constitutional duty has been cast upon the High Courts to protect citizens from encroachment on their legal and particularly the fundamental rights and the courts are required to act as watch-dogs of the Constitution.
90. That being so, we are satisfied that in the facts of these cases a bald reference in Ex. R-l to the audit report, which is certainly non-statutory and is a sort of objection by an auditor, cannot provide the existence of a reasonable belief that on account of the failure of the assessee to disclose the material facts truly and fully, the wealth has escaped assessment.
91. In reopening a case, the WTO is required to be satisfied on both counts, namely, that wealth has escaped assessment and further that this has happened because of the non-disclosure of material facts truly and fully. Of course, for all this, he is required to have only reasonable belief and that reasonable belief is to be objective and based on legal, tangible, rational grounds and not suspicions or conjectures, doubts or surmises and further it cannot be based on a change of opinion or a change in the method of valuation. It is also well settled that finality is provided to the assessment once completed, subject to the right of appeal, revision and reference before the hierarchy of authorities mentioned in the Act. The reopening under Section 17 is an abnormal and exceptional remedy to be used and which can be used only on the existence of the pre-requisite jurisdictional facts or failure of the assessee to disclose truly and fully the material facts under Section 17(1)(a) and information under Section 17(1)(b) and further both of which should lead to the escapement of the assessment of true wealth in a given case. Necessity of such a requirement has been emphasised by a recent judgment of this court on November 26, 1979, in D. B. Civil Writ PetitionNo. 1178 of 1974 (P.D. Bangur v. WTO, the Rajasthan High Court decided on 26-11-1979 three Writ Petitions Nos. 1177/74 (P.D. Bangur v. ITO) and 1182/74 & 57/75 (R.L. Bangur v. ITO) applying the I.T. Act, 1961, by one judgment reported as (P.D. Bangur v. ITO), and two W. Ps. Nos. 1178/74 (P.D. Bangur v. WTO) and 1181/74 (R.L. Bangur v. WTO) applying the W.T. Act, 1957, by another single judgment following the law enunciated on the question of reopening of assessments in the former judgment as all the cases pertained to the same question of law. As the latter judgment s narrate only the facts of the cases, they are not reported) in which, dealing with a case under Section 17(1)(b), this court held that the reopening cannot be permitted because of the absence of the pre-existing conditions mentioned in Section 17 of the Act. We are in respectful agreement with the view taken in this judgment also.
92. The second premises of the submission of Mr. Mehta relates to the contention that there was no emission or failure by the assessee to disclose truly and fully the material facts as contemplated by Section 17(1)(a) and, therefore, neither any wealth has escaped assessment nor it has escaped assessment on account of non-disclosure of material facts truly and fully.
93. Mr. Mehta took us through the copies of the wealth-tax returns filed under Section 14 of the Act and the approved valuer's reports for showing the basis of the valuation of the immovable property, A perusal of the valuer's report shows that they have been given by an approved valuer and further the valuer has calculated the cost of construction on the basis of the schedule of rates prescribed by the department and also calculated the valuation on the basis of the monthly rental method. After application of both the methods, the mean value has been taken as the amount of valuation. The assessment has been made after notice to the assessee and after discussion with the authorised representatives of the assessee, and the WTO did apply his mind to the primary facts disclosed in the form of the return and the approved valuer's report produced in support of them.
94. The question which requires serious consideration is whether the mere fact that at a subsequent time, the Valuation Officer has given a different valuation under s, 16A, is sufficient for creating a ground for reasonable belief by the WTO that the petitioner has failed to disclose truly and fully material facts; and in a case covered by Section 17(1)(b), whether they can be a a good and valid information for holding that wealth has escaped assessment.
95. The contention of Mr. Mehta that once the primary facts are disclosed and evidence is produced before the WTO, it is not for the assessee to point out to him that that evidence or the facts which have been produced can be also taken for raising various types of other inferences or drawing different conclusions or deductions from them. Mr. Mehta, in support of his contention, has relied upon various judgments of the hon'ble SupremeCourt, the first and foremost being the basic important judgment of Calcutta Discount Co. v. ITO : 41ITR191(SC) . It was observed therein (p. 201):
'If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn ?'
96. In CIT v. Bhanji Lavji : 79ITR582(SC) it was held as under (p. 587):
'It is not for the assessee to satisfy the Income-tax Officer that there was no concealment with regard to any question; it is for the Income-tax Officer, if that issue is raised, to establish that the assessee had failed to disclose fully and truly certain facts material to the assessment of income which had escaped assessment.'
97. In CIT v. Burlop Dealers Lid. : 79ITR609(SC) it was held :
' The assessee had disclosed his books of account and evidence from which material facts could be discovered : it was under no obligation to inform the Income-tax Officer about the possible inferences which may be raised against him. It was for the Income-tax Officer to raise such an inference and if he did not do so the income which has escaped assessment cannot be brought to tax under Section 34(1)(a).'
98. The same question in a different form was considered by the Supreme Court in Chhugamal Rajpal v. S. P. Chaliha : 79ITR603(SC) and it was held (p. 607) :
'Before issuing a notice under Section 148, the Income-tax Officer must have either reason to believe that by reason of the omission or failure on the part of the assessee to make a return under Section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of Clause (a) or Clause (b) of Section 147 are satisfied, the Income-tax Officer has no jurisdiction to issue a notice under Section 148.'
99. In a Gujarat case, Poonjabhai Vanmalidas and Sons v. CIT : 95ITR251(Guj) the Gujarat High Court observed as under (p. 275, 276):
'All the facts from which the necessary inference can be drawn were before the Income-tax Officer who made the original assessment. It was not for the assessee to point out what possible inference can be drawn by the Income-tax Officer making the original assessment at the time when the assessment was made in 1947. As the Supreme Court has pointed out, the only obligation on the assessee was to place all the primary facts before the Income-tax Officer who made the original assessment and once he placed those primary facts his obligation came to an end. It was open to the Income-tax Officer to draw an inference adverse to the assessee when he passed the order on January 23, 1947, regarding the entire transaction in favour of M/s. K. Nagardas and Co. yet instead of drawing an adverse inference against the assessee, the Income-tax Officer rested himself content with observing that the matter between the assessee and M/s. K. Nagardas & Co. had not been finally settled and the assessee was in possession and ownership of the whole property known as Maganbhai's Vadi. The assessee was under no obligation to put forward before the Income-tax Officer at the time of the original assessment a version contrary to the version that he was contending for, viz.....Merely because the Income-tax Officer in 1947 raised an inference,which he subsequently regards as erroneous, the proceedings under Section 34(1)(a) cannot lie.'
100. In view of the fact that the controversy of reopening is always an important and alive controversy because of the unending struggle between the revenue and the assessee on the point of avoiding tax versus evading tax, the Supreme Court, in spite of the earlier judgments mentioned above, again considered it in Gemini Leather Stores v. ITO : 100ITR1(SC) and observed as under (p. 4):
'In the case before us the assessee did not disclose the transactions evidenced by the drafts which the Income-tax Officer discovered. After this discovery the Income-tax Officer had in his possession all the primary facts, and it was for him to make necessary enquiries and draw proper inference as to whether the amounts invested in the purchase of the drafts could be treated as part of the total income of the assessee during the relevant year. This the Income-tax Officer did not do. It was plainly a case of oversight, and it cannot be said that the income chargeable to tax for the relevant assessment year had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all the material facts. The Income-tax Officer had all the material facts byefore him when he made the original assessment. He cannot now take recourse to Section 147(a) to remedy the error resulting from his own oversight.'
101. A little later, the matter came up for consideration in ITO v. Lakhmani Mewal Das : 103ITR437(SC) and the Supreme Court observed as under (p. 445):
' The grounds or reasons which lead to the formation of the belief contemplated by Section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of the grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. The expression 'reason to believe' does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence.'
102. Lastly, in the latest case of Parashuram Pottery Works Co. v. ITO : 106ITR1(SC) the Supreme Court again reiterated the same principles in the following language (page 9):
' The case of the appellant is that in determining the amount of depreciation at the time of the original assessment for the two assessment years in question, the Income-tax Officer relied upon the written down value of the various capital assets as obtaining in the records of the department. This stand has not been controverted. When an Income-tax Officer relies upon his own records for determining the amount of depreciation and makes a mistake in doing so, we fail to understand as to how responsibility for that mistake can be ascribed to an omission or failure on the part of the assessee.....It seems that the Income-tax Officer inworking the figures of depreciation for certain items of capital assets lost sight of the fact that the aggregate of the depreciation, including the initial depreciation, allowed under the different heads could not exceed the original cost to the assessee of those items of capital assets. The appellant cannot be held liable because of this remissness on the part of the Income-tax Officer in not applying the law contained in Clause (c) of the proviso to Section 10(2)(vi) of the Act of 1922.'
103. The crux of the ratio decidendi in the above judgments is that the assessee is required to disclose the primary facts which are material for the assessment purposes and once he has done so, he is not required to point out what inferences can be drawn from them. It was for the ITO toaccept or reject these primary facts and to raise such inferences as he may deem proper and if he has not done so, it cannot become a ground for reopening under Section 17(1)(a) and (b) of the Act. Even the wrong acceptance, of a valuer's report by the WTO cannot become a ground for reopening because so far as the assessee is concerned, the report was produced and it was for the WTO to accept or reject it on any ground whatsoever. The emphasis under Section 17(1)(a) is on non-disclosure or failure to disclose. Production of a valuer's report in support of the material fact of the value of the property is a disclosure and could never be termed as a non-disclosure, as a non-disclosure is an antithesis of a disclosure.
104. Mr. Mehta also submitted as the third limb of his arguments that Section 17(1)(a) cannot be invoked if there is a change in the valuation method and he relied on ITO v. British Paints India Ltd. : 118ITR878(Cal) of the Calcutta High Court and Durga Sharan Udho Prasad v. CIT : 103ITR270(Patna) wherein the Calcutta High Court and the Patna High Court have taken the view that on the basis of the change in the method of valuation, a finding of non-disclosure of true and material facts cannot be sustained.
105. It was then argued as the fourth limb of the arguments that a change of valuation is a mere 'change of opinion' and it can never authorise the WTO to issue a notice for reopening. Reliance was placed on the judgments of the Supreme Court in CIT v. Simon Carves Ltd. : 105ITR212(SC) and of the Madras High Court in CWT v. KM. Desikar : 92ITR101(Mad) .
106. Lastly, even in relation to the method of valuation, Mr. Mehta submitted that in the rental method a multiplier rate of 8 1/3 times has been upheld and further it has been held that the minimum valuation beneficial to the assessee must be adopted. Reliance was placed on CIT v. Smt. Vimlaben Bhagwandas Patel & Smt. Kamlaben Kanjibhai Patel : 118ITR134(Guj) wherein it was observed as under at p. 198 :
' In our opinion, therefore, the just, reasonable and appropriate rate of capitalisation would be eight and one-third times the net average annual income which would give the yield of 12% per annum on the investment of capital in property.'
107. Jaswant Rai v. CWT contained the following observations (p. 481):
'In Commissioner of Income-tax v. Vegetable Products Ltd. : 88ITR192(SC) it was held by the Supreme Court that if the language of a taxing provision is ambiguous or capable of more meanings than one, then the court has to adopt that interpretation which favours the assessee. This principle applies with full vigour to a case in which different values of the same property are arrived at by adopting different methods.
We are, accordingly, of the view that the choice of the method to be adopted for determining the value of property should be left to the assessee.'
108. The learned counsel for the respondent vehemently opposed the above submissions and submitted that the very fact that there is a great difference between the valuation of the disputed properties now received from the Valuation Officer and the earlier valuation mentioned in the return is enough for a reasonable belief that the assessee failed to disclose the material facts truly and fully, as a result of which the wealth escaped assessment. Reliance was placed by him on another set of judgments of the Supreme Court in S. Narayanappa v. CIT : 63ITR219(SC) and in Kantamani Venkata Narayana and Sons v. 1st Addl. ITO : 63ITR638(SC) wherein, at page 643, the following has been observed :
' The Income-tax Officer had, therefore, prima facie, reason to believe that information material to the assessment had been withheld, and that on account of withholding of that information income liable to tax had escaped assessment. From the mere production of the books of account it cannot be inferred that there had been full disclosure of the material facts necessary for the purpose of assessment. The terms of the explanation are too plain to permit an argument being reasonably advanced, that the duty of the assessee to disclose fully and truly all material facts is discharged when he produces the books of account or other evidence which has a material bearing on the assessment. It is clearly implicit in the terms of Sections 23 and 34 of the Income-tax Act that the assessee is under a duty to disclose fully and truly material facts necessary for the assessment of the year, and that the duty is not discharged merely by the production of the books of account or other evidence. It is the duty of the assessee to bring to the notice of the Income-tax Officer particular items in the books of account or portions of documents which are relevant. Even if it be assumed that from the books produced the Income-tax Officer, if he had been circumspect, could have found out the truth, the Income-tax Officer may not on that account be precluded from exercising the power to assess income which had escaped assessment.'
109. It was argued that the existence of the belief can be challenged by the assessee but not the sufficiency or the reasons for the same. According to Mr. Parakh, unless the assessee is able to show that the valuation report, on the basis of which the above cases are being reopened is not relevant, for the purposes of Section 17(1)(a) or that it is not rational to consider it for that purpose, the other submissions of Mr. Metha have got no relevance and are to be rejected solely on the ground that they are irrelevant to the controversy in this case.
110. He relied upon the judgments reported in R. Dalmia v. Union of India : 84ITR616(Delhi) and Assistant CED v. Nawab Sir Mir Osman Ali Khan Bahadur : 72ITR376(SC) .
111. In Kantamani Venkata Narayana and Sons v. 1st Addl, ITO : 63ITR638(SC) it was observed as under (p. 638):
'The assessee does not discharge his duty to disclose fully and truly material facts necessary for the assessment of the relevant year by merely producing the books of account or other evidence. He has to bring to the notice of the Income-tax Officer particular items in the books of account or portions of documents which are relevant. Even if it be assumed that from the books produced the Income-tax Officer, if he had been circumspect, could have found out the truth, he is not on that account precluded from exercising the power to assess income which had escaped assessment.'
112. The question of jurisdiction of this court under Article 226 of the Constitution in relation to a challenge to the notice for reopening was also considered and it was observed as under (p. 639):
' In proceedings under article 226 of the Constitution of India challenging the jurisdiction of the Income-tax Officer to issue a notice under Section 34(1)(a), the High Court is only concerned to decide whether the conditions which invested the Income-tax Officer with power to reopen the assessment did exist: it is not within the province of the High Court to record a final decision about the failure to disclose fully and truly all material facts bearing on the assessment and consequent escapement of income from assessment and tax.'
' The court further held that where the Income-tax Officer has prima facie reasonable grounds for believing that there has been a non-disclosure of a primary material fact, that by itself gives him jurisdiction to issue a notice under Section 34 of the Act, and the adequacy or otherwise on the grounds of such belief is not open to investigation by the court.' (p. 641)
113. Referring to S. Narayanappa v. CIT : 63ITR219(SC) the court observed :
'...the legal position is that if there are in fact some reasonable grounds for the Income-tax Officer to believe that there had been any nondisclosure as regards any fact, which could have a material bearing on the question of under-assessment, that would be sufficient to give jurisdiction to the Income-tax Officer to issue a notice under Section 34. Whether these grounds are adequate or not is not a matter for the court to investigate. In other words, the sufficiency of the grounds which induced the ITO to act is not a justiciable issue.' (p. 641)
' The High Court was only concerned to decide whether the conditions which invested the Income-tax Officer with power to reopen theassessment did exist, and there is nothing in the judgment of the High Court which indicates that they disagreed with the view of the trial court that the conditions did exist (p. 644).'
114. In R. Dalmia v. Union of India : 84ITR616(Delhi) the question was again considered and it was observed as under (headnote):
'All that Clause (a) of Section 147 of the Income-tax Act, 1961, requires is that the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment and not that he should launch an investigation and come to a positive finding before issuing the notice. There should be facts before him that reasonably give rise to the belief. The belief held by him must of course be in good faith. It cannot be a mere pretence ; but the facts on the basis of which he entertained the belief need not at this stage be irrebuttably conclusive to support his tentative conclusion..... Whether the facts before the Income-tax Officerwere in fact true or not and whether these grounds were adequate or not is not a matter for the court to investigate at this stage.
Where the items of escaped income in respect of which the assessment is proposed are specific, but the question as to whether the income, if earned, was earned by one person singly or by him along with others is a matter of inquiry, if the Income-tax Officer has reason to believe that it could have been earned either by one person singly or by him along with others there is nothing to prevent him from initiating proceedings against the concerned assessees in both capacities.'
115. What can constitute information on the basis of the note of the Central Board of Revenue was considered in Assistant CED v. Nawab Sir Mir Osman Ali Khan Bahadur : 72ITR376(SC) and it was observed as under (headnote):
'The opinion of the Central Board of Revenue regarding the correct valuation of securities for purposes of estate duty, expressed in an appeal preferred by the accountable person, is 'information' within the meaning of Section 59 of the Estate Duty Act, 1953, as amended by the Estate Duty (Amendment) Act of 1958, on the basis of which the Controller can entertain a reasonable belief that property assessed to estate duty has been under-valued.'
116. A caution that the High Court should not substitute its jurisdiction under Article 226 of the Constitution of India for the jurisdiction of the ITO concerned, was given in CIT v. A. Rawtan and Co. : 67ITR11(SC) and it was observed as under (head note) :
' Whether on the information in his possession he should commence proceedings for assessment or reassessment, must be decided by the Income-tax Officer and not by the High Court. The Income-tax Officer alone is entrusted with the power to administer the Act: if he has information from which it may be said, prima facie, that he had reason to believe that the income chargeable to tax had escaped assessment, it is not open to the High Court exercising powers under Article 226 of the Constitution to set aside or vacate the notice for reassessment on a reappraisal of the evidence.
In a petition under article 226 of the Constitution, a taxpayer may challenge the validity of a notice under Section 147 of the Income-tax Act, 1961, on the ground that either of the conditions precedent does not exist, but an investigation, whether the inferences raised by the Income-tax Officer are 'correct or proper' cannot be made.'
117. We have given very careful and thoughtful consideration to the various principles enunciated in the important judgments mentioned above. The relevant portions extracted above from the judgments of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO : 41ITR191(SC) CIT v. Bhanji Lavji : 79ITR582(SC) CIT v. Burlap Dealers Ltd. : 79ITR609(SC) Chhugamal Rajpal v. S. P. Chaliha : 79ITR603(SC) Gemini Leather Stores v. ITO : 100ITR1(SC) ITO v. Lakhmani Mewal Das : 103ITR437(SC) Parashuram Pottery Works Co. Ltd. v. ITO : 106ITR1(SC) and of the Gujarat High Court in Poonjabhai Vanmalidas and Sons (HUF) v. CIT : 95ITR251(Guj) establish that once the assessee discloses the primary facts without concealing any material fact there cannot be any basis for the belief that the assessee has failed to disclose material facts truly and correctly resulting in wealth escaping assessment. If from the primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. If any evidence can be discovered from the books and documents produced by the assessee which can be used against the assessee, the assessee is not under an obligation to inform the ITO about the possible inferences which can be raised against him. The omission or failure should be on the part of the assessee. The only obligation on the assessee was to place all the primary facts and once he places those primary facts, his obligation comes to an end. It is not for the assessee to put forward before the ITO a version contrary to the version that he was contending for. It is for the ITO to make all necessary enquiries and draw proper inferences. If it becomes a case of oversight it cannot be said that income chargeable to tax has escaped assessment. So far as the adequacy of the grounds is concerned, the court cannot investigate but the existence of such a belief can be challenged. The expression 'reason to believe' does not mean a purely subjective satisfaction of the assessing authority. It can neither be a pretence merely to reopen the assessment and it must be held in good faith. If the assessing authority, relying upon the record, only makes a mistake theresponsibility cannot be ascribed to an omission or failure on the part of the assessee.
118. Even according to the principles laid down in S. Narayanappa v. CIT : 63ITR219(SC) and Kantamani Venkata Narayana and Sons v. 1st Addl. ITO : 63ITR638(SC) relied upon by Mr. Hastimal Parakh, learned counsel for the revenue, all that can be said is that the mere production of the account books is not enough to discharge the duty of the assessee but he must bring to the notice of the ITO the particular items which are relevant. Again, according to the reliance placed on R. Dalmia's case : 84ITR616(Delhi) by Mr. Parakh, all that can be said is that Clause (a) of Section 147 of the I.T. Act, 1961, nowhere requires that the ITO should launch an investigation before reaching a positive finding for giving a notice, but if some facts are there before him which reasonably can give rise to the belief he gets jurisdiction to issue the notice for reopening. Whether these facts were in fact true or not and whether these grounds were adequate is not a matter for the court to investigate at this stage.
119. Thus, it would be seen that on the application of the ratio decidendi of the above case law relied upon by both the learned counsel the fact that primary facts in the nature of the valuation reports of the immovable property of the approved valuers were submitted and considered by the WTO in all the 11 instant cases is not in dispute. The valuer's reports mention the details of the property giving the location, area, dimensions of the apartments, quality of construction, etc. The rates of rent of the various apartments have also been mentioned and by striking a mean of the value from both methods, valuation has been done. All the assessments have been made after calling the assessee and a detailed discussion was had and his mind was applied by the WTO at the time of the initial assessment. Thus, all the primary facts were disclosed truly and fully which were required under the law under Section 14 of the W.T. Act. Under the returns submitted, the valuations were given as on the respective valuation dates. The WTO is required to assess the property valuation under Section 7(1) of the Act. The valuation is a matter of estimate and opinion and to some extent guess-work also. Thus, all having been done, the assessee discharged his duties to disclose truly and fully material facts. In such circumstances, how could the assessee be charged with the failure to communicate all the inferences the WTO might or might not have drawn. It was for the WTO to make further investigation about the exact dates of the valuer's reports, the rents available from the property for the relevant years and the price of the land and the construction, if he had any doubts about the genuineness or correctness of the data given by the assessee for each year. He should have accepted or rejected them, could have madefurther investigation or additions or referred the matter to the Valuation Officer under Section 16A of the W.T. Act for the valuation of the immovable property but since he after a careful and thoughtful consideration of the primary facts and evidence produced before Mm and the answers given to his queries, if any, during discussion, felt satisfied and accepted them, it cannot be said that there has been any non-disclosure by the assessee under Section 17(1)(a) of true material facts. It cannot be said that the WTO has received any information under Section 17(1)(b) simply because the Valua- tion Officer has given a different valuation of the property later on, on a reference by the WTO for the purposes of reopening, and the details and data and reasons of which are not known and which have been withheld from this court. The same applies to the audit objections and the audit reports. Even according to the principle laid down in the cases cited by Mr. Parakh it cannot be said that, in the instant cases, the assessees failed to point out any relevant portion of the valuation reports which could have gone against them. In any case, such a comparison would have been possible if revenue would have produced both the valuer's reports, the one filed by the assessee and the one obtained under Section 16A of the Act from the Valuation Officer. No such ground has been taken nor details have been given in the reply filed by the revenue in these cases and that being so, merely on the abstract proposition of law relied upon by Mr. Parakh in S. Narayanappa v. CIT : 63ITR219(SC) and Kantamani Venkata Narayana and Sons v. 1st Addl. ITO : 63ITR638(SC) it cannot be said that, in the instant cases, the assessee failed to bring to the notice of the WTO any portion of the documents submitted by her which were relevant or the particular items in them. After placing reliance upon the above proposition of law it was further necessary for the revenue to have shown it from the reply in the writ substantiated by the copies of the valuers' reports, that certain items from them were not pointed out to the WTO or that certain portions from them were not shown to the WTO in order to take advantage of the principles enunciated in the above cases for justifying the reopening of these cases.
120. We are, therefore, of the opinion that the revenue has failed to either mention in the reply of the writ applications, any relevant material, data, details or reasons providing a justification for the reopening notices under Section 17(1)(a) or (b) of the Act, nor any such ground or reason which could have justified them, have been further substantiated by references to the primary facts earlier disclosed by the assessee and which were substantiated by the approved valuer's reports. We are conscious that we cannot go into the adequacy or sufficiency of the reasons which have been either the 'reason to believe' under Clause (a) or the information under Clause (b) of Section 17(1) and, therefore, we have concentrated only on the enquiry whetherany such reason or fact at all existed. Having found that there has been no existence of such facts or grounds which can constitute the 'reason to believe' that the assessee has failed to disclose material facts truly and fully resulting in wealth escaping assessment for the purposes of Section 17(1)(a) and further that there is no information in the eye of law showing that wealth has escaped assessment in these eases as required by Section 17(1)(b), we have no hesitation in holding that the impugned notices for reopening have been issued without any legal foundation and are consequently liable to be quashed in all these 11 cases on this second important premises also, the first being that the report of the Valuation Officer under Section 16A obtained for the purposes of considering the question of reopening is non est, illegal, void and invalid ab initio because Section 16A cannot be used for it.
121. So far as the third submission of Mr. Mehta based on the judgments of ITO v. British Paints India Ltd. : 118ITR878(Cal) and Durga Sharan Udho Prasad v. CIT : 103ITR270(Patna) of the Calcutta High Court and the Patna High Court is concerned, since the revenue has not produced the valuation reports of the Valuation Officer, it is difficult to say whether the difference in the valuation of the property has been arrived at on account of a change in the valuation method. Unless we are sure on the basic facts regarding the reasons for the difference in the valuation of the property arrived at by the Valuation Officer, it would not be possible to hypothe-tically decide the correctness of the submission of Mr. Mehta on the third and fourth premises. This applies to the last submission of Mr. Mehta that the method of valuation by rental method with a multiplier rate of 8-1/3 times has to be upheld. We would, therefore, like to leave these contentions of Mr. Mehta undecided, as the decision would be on the basis of hypothetical facts and assumptions only. If the revenue would have produced the valuer's reports and the audit objection then of course, it would have been possible for us to consider these contentions of Mr. Mehta in the light of facts. But since they have not been produced it is not necessary to decide these points one way or the other.
122. We have not discussed in detail the preliminary objection of Mr. Parakh that a writ application cannot be entertained at this stage because the assessee has got a remedy of appeal after reassessment is made and there being an alternative remedy, the jurisdiction under Article 226 should not be invoked. The reasons for this is that Mr. Parakh himself was conscious of the futility of this objection in view of the earlier judgments in Calcutta Discount Co.'s case : 41ITR191(SC) referred to above and a series of judgments of the Supreme Court later on in which it has been repeatedly held that this court can certainly entertain writ applications, if the jurisdiction of the assessing authority for issuing reopening notices on account of the absence of the existence of 'reasonable belief' or' information' tinder Section 17(1)(a) and (b) respectively is challenged, as that goes to the very root and relates to the basic jurisdiction of the authority concerned. It may also be made clear that the availability of the alternative remedy which was expressly made a bar to the entertainment of a writ application under Article 226 by the amendment of this article by the 42nd amendment has also now disappeared by virtue of the 44th amendment of the Constitution recently made. That being so, the original law as it stood earlier holds the field and on that point, the law being well settled Mr. Parakh himself did not develop this objection any further, except mentioning it for being recorded only.
123. The net result of our above discussion can be summarised as follows :
(1) That Section 16(1)(a) of the W.T. Act cannot be invoked for obtaining the valuation officer's report for the purposes of considering whether the wealth has escaped assessment by under-valuation warranting reopening under Section 17 of the Act as this section can be used only for the limited purposes of assessment or reassessment.
(2) That in all the eight writ petitions being Nos. 265/78, 321/78, 322/78, 323/78, 324/78, 315/78, 317/78 and 319/78 since notices for reopening are on the basis of the valuation officer's reports under Section 16(1)(a), which are non-existent in law, reopening notices are liable to be quashed.
(3) That in writ applications being Nos. 316/78, 318/78 and 320/78, notices for reopening under Section 17 are based on the audit objections which cannot provide a ground for 'reason to believe' that wealth has escaped assessment on account of the assessee's failure to disclose the material facts truly and fully, are liable to be quashed.
(4) That in all the 11 writ petitions, the petitioners have established that the respondent had neither any reason to believe that the wealth of the petitioners escaped assessment on account of the failure of the petitioners to disclose the material facts truly and fully as required by Section 17(1)(a) nor the respondent had any information that the wealth of the petitioners have escaped assessment as required by Section 17(1)(b) and, therefore, the impugned notices for reopening under Section 17 against the petitioners are liable to be quashed.
(5) That in the writ petitions of Anandkumari, Nos. 265/78, 321/78, 322/78, 323/78 and 324/78, the basis of reopening Ex. R-1 contains the valuation of the property as on April 1, 1974, which is not for the relevant year and the revenue having failed to show how for the years commencing from 1969-70 to 1973-74, the valuation was arrived at in Ex. R-l in each case, the reopening notices are liable to be quashed.
124. The result is that all the 11 writ petitions are accepted and the notices dated May 4, 1970, under Section 17 of the W.T. Act to Smt. Anandkumari who has been succeeded by Brig. B. Lall for the assessment years1969-70, 1970-71, 1971-72, 1972-73 and 1973-74 for reopening the completed assessment of wealth-tax are quashed. Similarly, notices dated 7th March, 1978, under Section 17 of the W.T. Act, issued to Xawal Kanwar for the assessment years 1969-70, 1970-71, 1971-72, 1972-73, 1973-74 and 1974-75 for reopening the completed assessment of the wealth-tax are quashed.
125. The respondents are restrained from reopening the above completed assessments.
126. The parties would bear their own costs.