Dipak Kumar Sen, J.
1. Gobindlal Bangur has moved this application as the karta of a HUF known and styled as Narain Das Govindlal Bangur, alleging, inter alia, as follows :
On the 29th September, 1969, the petitioner, as such karta, filed a return of wealth-tax for the assessment year 1969-70, the relevant valuation date whereof being 31st March, 1969. A net wealth of Rs. 7,21,248 was disclosed in the return, consisted, inter alia, of shares in joint stock companies both quoted and unquoted and in the return the value of the quoted shares was shown as quoted in the official market quotation list of a recognized stock exchange on the said valuation date. A revised return was filed on the 17th April, 1970, showing revaluation of immovable properties of the said family and claiming exemption in respect of jewellery under Section 5(i)(viii) of the W.T. Act. The WTO completed the assessment under Section 16(c) of the W.T. Act on the 25th March, 1971, after due consideration of the returns filed by the petitioner and after examination of all materials disclosed. The net wealth of the said family for the said assessment year was computed at Rs. 23,65,309.
2. On an appeal to the AAC of Wealth-tax, Range-I, Calcutta, the petitioner obtained some relief and the wealth of the family was recomputed at Rs. 20,67,396.
3. On the 3rd April, 1974, the petitioner received a notice dated the 26th March, 1974, issued by the WTO, ' P ' Ward, District I(I), Calcutta, under Section 17 of the W.T. Act, 1957, stating, inter alia, that he had reason to believe that the net wealth of the said family chargeable to tax for the assessment year 1969-70 had escaped assessment within the meaning of Section 17 of the said Act and that he proposed to reassess the same. The petitioner was accordingly directed to file a fresh return for the said assessment year.
4. By his letter dated the 19th April, 1974, the petitioner denied the allegations and disputed the contentions in the said notice contending that the WTO had no jurisdiction to issue the said notice and that the same was illegal and void and should be withdrawn and cancelled.
5. The petitioner obtained the rule nisi in this application on the 29th April, 1974, calling upon the respondents, namely, the WTO, ' P ' Ward, District I(I), Calcutta ; the WTO, Central Circle-I, Calcutta; the CWT, West Bengal, and the Union of India to show cause why appropriate writs should not be issued directing them to rescind, cancel and withdraw the said impugned notice dated the 26th March, 1974, and to refrain from giving any effect or to take any steps pursuant thereto and setting aside or quashing the same. An interim order was also passed giving liberty to the respondents to continue, complete and conclude the reassessment under the said notice but not to give effect to or communicate the order passed in the said reassessment until the disposal of the rule.
6. The petitioner seeks to impugn the said notice dated 26th March, 1974, on, inter alia, the following grounds :
(a) Conditions precedent necessary to confer jurisdiction on the WTO to initiate the proceedings under Section 17 of the W.T. Act, 1957, were not in existence for issue of the said impugned notice.
(b) No wealth of the family chargeable to tax, for the said assessment year, had escaped assessment within the meaning of Section 17 of the W.T. Act.
(c) The WTO had or could have no reason or material to believe that any wealth of the family had escaped assessment in the said assessment year.
(d) The WTO did not in fact hold any belief as required under Section 17 of the Act.
(e) All primary and material facts necessary for assessment under the W.T. Act for the said assessment year had been disclosed fully and truly by the petitioner at the original assessment.
(f) There was no omission or failure whatsoever to disclose fully and truly any primary or material fact necessary for such assessment in the said assessment year.
(g) No new material or fact from any external source had come into the possession of the WTO concerned not known to his predecessor at the time of making the original assessment on which he could have any reason to believe that any wealth had escaped assessment.
(h) The impugned proceedings have been initiated for a collateral purpose and to conduct a fishing and roving investigation, contrary to law.
(i) The alleged reason and information, if any, in possession of the WTO had no rational connection with or relevance for the formation of the requisite belief within the meaning of Section 17 of the W.T. Act.
(j) The WTO did not record any reasons for the issue of the said impugned notice as required in law.
7. This application is opposed. An affidavit of Radha Krishna Saha, the ITO, District, I(I), ' P' Ward, Calcutta, affirmed on, the 10th November, 1975, has been filed in opposition to the petition. It is, inter alia, stated in the said affidavit as follows :
(a) The wealth-tax assessment for the said assessment year was reopened under Section 17 of the W.T. Act on information received that in the original assessment the wealth had been underassessed.
(b) Such information was conveyed to the WTO concerned by the ITO, Special Intelligence Branch, West Bengal-VI, Calcutta, by his letter dated the 26th March, 1974, enclosing the following :
(i) A letter dated the 22nd March, 1974, from the Deputy Director, Directorate of Inspection (Investigation), Special Cell, New Delhi, to the Commissioner of Income-tax (Central), Calcutta.
(ii) A letter dated the 23rd March, 1974, from the Commissioner (Central), Calcutta, to the Commissioner, West Bengal VI, Calcutta.
(iii) A letter dated the 23rd March, 1974, from the Deputy Director, Directorate of Inspection (Investigation), Special Cell to the Commissioner, West Bengal VI, Calcutta.
(c) It appeared from the said letters that shares of Maharaja Shree Umaid Mills Ltd. (hereinafter referred to as the said company) owned by the said family had not been quoted regularly and that the quotations disclosed were far below the fair market value of the said shares.
(d) At the relevant valuation date the said family held 575 ordinary shares of the said company shown at the quoted value of Rs. 91 per share which had been accepted at original assessment.
(e) On account of infrequency of quotations the shares of the said company did not come within the definition of Rule 1A(1) of the W.T. Rules, 1957,and their value had to be determined as per Rule 1D of the W.T. Rules, 1957.
(f) On the above basis the value of the said shares came to Rs. 258.43 as against Rs. 91 as declared at the original assessment.
(g) Accordingly wealth to the extent of Rs. 96,272 had escaped assessment.
8. An affidavit affirmed by one Shyam Sundar Maloo on the 1st April, 1978, had been filed in reply to the said affidavit of the ITO. It is, inter alia, stated in this affidavit that the shares of the said company had been regularly quoted in the stock exchange in Calcutta since 1960 and at each assessment of the petitioner under the W.T. Act the said shares had been assessed according to relevant market quotation. It is stated further that from the disclosure of the information it appeared that the WTO concerned had issued the impugned notice under the positive direction and order of his superior officers and did not apply his mind. It is contended that the revenue authorities are proceeding to reassess the petitioner on the basis of a mere change of opinion and following a different method of valuation which was not authorised in law.
9. At the hearing, the learned advocate for the petitioner, reiterated the contentions in the petition. He submitted that the letters, on the basis of which the WTO proceeded to reopen the assessment of the petitioner, did not constitute ' information ' within the meaning of Section 17 of the W.T. Act nor did the said letters establish that there had been any failure or omission on the part of the petitioner to disclose any material or primary fact relevant to the assessment. The learned advocate further contended that in the first letter dated the 22nd March, 1974, written by the Deputy Director, Directorate of Inspection (Investigation), Special Cell, the only information recorded was that shares of the said company were being transferred ' probably within the Bangur group ' at values below their fair market value. It was further recorded that the IAC, Jodhpur, under whose jurisdiction the said company had its registered office had been requested to value the shares of the said company as on the 31st March, 1969, by the break up method, as also by the profit method and communicate such information to the Deputy Director at Calcutta. The learned advocate submitted that there was nothing in this letter to show that apart from mere suspicion there was any information that the said shares had been undervalued or that there had been any suppression by the petitioner of any material fact.
10. From the next letter dated the 23rd March, 1974, written by the Commissioner (Central), Calcutta, to the Commissioner, West Bengal VI, Calcutta, it appears that directions were being given to have the matters examined by the ITO and or the IAC concerned so that action, if necessary,might be taken within the period of limitation. Learned advocate submitted that this letter also did not contain any information or any new information.
11. The next letter from the Deputy Director of Inspection (Investigation), Special Cell, from his camp in Calcutta to the Commissioner, West Bengal VI, Calcutta, dated the 23rd March, 1974, recorded that the Deputy Director concerned had gathered 'some information from the Calcutta office of the Stock Exchange Division, Ministry of Finance, Department of Economic Affairs, regarding the quotations of the said company in the Calcutta Stock Exchange. Twelve of such quotations between the 21st March, 1967, and the 13th March, 1974, were referred to and it was concluded that the infrequency of quotations and small turnover in the shares proved the manipulation and did not reflect the fair market value and such shares would come under the definition of Rule 1A(1) of the W.T. Rules, 1957. It was finally directed in this letter that the information therein should be passed on to the ITO concerned for taking appropriate action under the W.T. Act, I.T. and G.T. Acts as he might deem fit.
12. The learned advocate submitted that the Deputy Director concerned had already asked the IAC, Jodhpur, to compute the valuation of the shares of the said mill by the break-up method and by the profit method. He did not wait for such information but gathered information himself not from the recognized Stock Exchange at Calcutta but from a department of the Government of India. By considering only a few quotations he came to the conclusion that the quotations were infrequent and that the transactions were manipulated. There was no finding as to the value of the said shares or that they were undervalued.
13. The letter dated the 26th March, 1974, from the ITO, Special Investigation Branch, West Bengal VI, Calcutta, written on behalf of the Commissioner, West Bengal VI, to the WTO enclosed the aforesaid letters and recorded as follows :
' This company is an assessee of the Bangur group and the quotations available reveal the price at a figure which is far below the market price of the shares of the company.
As per the letter of the C.I.T. Central, copy of which has been attached herewith, cases of the assessees of Bangur group have been transferred to you from Central and you are, therefore, requested to scrutinise the assessment records of the person concerned as per the list of ordinary shareholders and list of transferors and transferees for taking necessary action under the Wealth-tax, Income-tax and Gift-tax Acts for the relevant cases.
Please note that discussions on the matter were held by you with Shri S. M. Bagai, D.D.I., (Inv.), Special Cell and detailed instructions have been given as to the actions to be taken, sections to be applied of the relevantActs and the manner in which reasons for reopening the assessments are to be recorded and this should be followed strictly and compliance report therefor sent through your range I.A.C. immediately so that no action can become time-barred by the provisions of limitations in the several Acts specially because actions both under Sections 17(1)(a) and 17(1)(b) of the Wealth-tax Act as well as under Section 147(a) and 147(b) of the Income-tax Act and, if necessary, corresponding provisions'of the Gift-tax Act have to be taken and the limitations prescribed are shorter for action under the sections named second in each case. '
14. The learned advocate for the petitioner contended that apart from some assertions there was nothing in this letter to show that the quotation of the said shares was below their market price. Up to that stage no one had computed the value of the said shares on any basis. He submitted further that this letter clearly indicated that detailed instructions had been given by the Deputy Director to the WTO as to the action to be taken, sections to be applied and the manner in which the reasons for reopening assessment were to be recorded. This letter enjoined that the WTO should follow the said directions strictly and submit a compliance report. The WTO had no other alternative after this letter but to follow and carry out the instructions given and as such the impugned proceedings were wholly vitiated. In support of his contentions, the learned advocate for the petitioner cited the following decisions :
(a) CIT v. Simon Carves Ltd. : 105ITR212(SC) . In this case, the Supreme Court laid down the principles to be applied in reassessment proceedings, as follows (p. 219):
'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-tax Officer making the original assessment. Nor is it open to the Income-tax Officer ordering assessment 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 methodof 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. ' (b) Chintapalli Agency Taluk Arrack Sales Co-operative Society Ltd. v. Secretary (Food and Agriculture); Government of Andhra Pradesh : 1SCR563 . This decision of the Supreme Court was cited for the following observation of the Supreme Court (p. 2318 of AIR): ' Any ' request' of the Government to a subordinate authority is tantamount to a positive direction or order and it will be difficult for the subordinate authority to disregard the same. '
15. The learned advocate also cited an unreported decision of this court in Civil Rule No. 3312 (W) of 1974 entitled Smt. Rajeswari Birla v. WTO [since reported in : 119ITR629(Cal) ]. In this case a wealth-tax assessment for the assessment year 1968-69 was sought to be reopened under Section 17 of the W.T. Act, 1957, on the basis of a letter from the IAC, Survey Range, Calcutta and a report of the Directorate concerned which was impugned on the ground that the officer concerned had acted only on the basis of the report and recommendation and did not apply his mind or form his opinion independently. The contentions of the assessee were accepted by a single Bench of this court which held that the reasons on which the assessment was sought to be reopened as recorded were different from the reasons as disclosed in the affidavit-in-opposition, the assessment was struck down.
16. The learned advocate appearing for the respondents sought to justify the reopening on the grounds disclosed in the affidavit of the ITO, District I(I), 'P' Ward. He submitted that the information on which the assessment was reopened consisted of the following.
(a) Infrequency of quotations of the said shares,
(b) Small turnover of the same, and
(c) Prima facie finding that the price quoted was far below the market price.
17. The learned advocate contended that at this stage it was not necessary to weigh such information to determine the correctness thereof and the same was sufficient to warrant reopening. The objections of the assessee could be agitated in the subsequent proceedings. The reasons recorded in writing by the ITO as required under Section 17 of the Act were produced. It appears that such reasons were recorded on the 26th March, 1974, the same day when the letter of the ITO, Special Investigation Branch was issued. The figure of Rs. 258.43 as the value of the disputed shares has been recorded in such reasons by hand whereas the rest of the report was typed.
18. Learned advocate ior the revenue in support of his contention cited a decision of a Full Bench of this court in Smt. Nirmala Birla v. WTO : 105ITR483(Cal) . In this case, the assessee, a trust known as the ' Chandralekha Trust ' was assessed to wealth-tax for the assessment year 1968-69. The valuation date being the 31st March, 1968, the dispute was regarding valuation of 10,000 shares of the Central India Industries Ltd., which were quoted at Rs. 13 per share in the recognised stock exchange. Thereafter on the 5th January, 1970, the Department of Company Affairs of the Government of India (sic). On the 3rd/4th February, 1970, the Commissioner, West Bengal-I, forwarded to the IAC, Range-I, Calcutta, copies of a report of the Special Cell of the Directorate of Inspection on under-assessment of wealth of shareholders of three closely held companies of the Birla group including the said Central India Industries Ltd., with a request to pass them on to the ITO dealing with the Birla group. On the 20th February, 1970, the ITO, Special Investigation Branch, forwarded to the IAC, Range-I, notes of his inspection of some of the companies of the Birla group. On the 28th March, 1970, reassessment proceedings were initiated against the trust and the WTO completed the assessment for the year 1968-69, accepting the quotations of the Indore Stock Exchange as to the valuation of the disputed shares. Long after the completion of such assessment the Directorate of Inspection (Investigation) of Special Cell addressed a letter to the Commissioner and on the 28th March, 1973, the IAC endorsed this letter to all the I.T. and W.T. Officers for information and necessary action directing that if any action involved was likely to be time-barred the same may be taken within the limitation period. Pursuant thereto on the 29th March, 1973, the WTO issued notice to the trust under Section 17 of the W.T. Act. On these facts, the Division Bench held that the report of the Special Cell of the Directorate of Inspection revealed that the transactions in the shares of the Central India Industries Ltd., as quoted in the Indore Stock Exchange were manipulated and collusive and made with the purpose of evading wealth-tax liabilities and there was a difference between the quoted value and the break-up value of the shares in dispute, It was also held that in the facts the WTO did not act on the command of his superior officers in initiating the reassessment. There was only a suggestion from the superior officers that in view of the report of the Special Cell the assessment might be reopened as a protective measure but the WTO did not follow such suggestion but he proceeded on his own and initiated regular reassessment and it could not be said that he did dot apply his mind.
19. At this stage, I may refer to the relevant sections and the rules framed under the W.T. Act. Section 17 provides as follows: ' 17. (1) If the Wealth-tax Officer--
(a) has reason to believe that by reason of the omission or failure on the part of any person to make a return under Section 14 of his net wealth or the net wealth of any other person in respect of which he is assessable under this Act for any assessment year or to disclose fully and truly all material facts necessary for assessment of his net wealth or the net wealth of such other person for that year, the net wealth chargeable to tax has escaped assessment for that year, whether by reason of under-assessment or assessment at too low a rate or otherwise ; or
(b) has, in consequence of any information in his possession, reason to believe, notwithstanding that there has been no such omission or failure as is referred to in Clause (a), that the net wealth chargeable to tax has escaped assessment for any year, whether by reason of under-assessment or assessment at too low a rate or otherwise ;
he may, in cases, falling under Clause (a) at any time within eight years and in cases falling under Clause (b) at any time within four years of the end of that assessment year, serve on such person a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 14, and may proceed to assess or reassess such net wealth, and the provisions of this Act shall, so far as may be, apply as if the notice had issued under that sub-section.'
20. Rule 1A provides as follows :
' lA....(j) 'recognised stock exchange ' has the meaning assigned to itin Clause (f) of Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);.........
(1) ' unquoted share ' means an equity share or a preference share of a company, other than any such share the value of which is regularly quoted at any recognised stock exchange ; '
21. The information on the basis of which the WTO proceeded in the instant case is confined to the said letters which passed between the officers of the revenue in March, 1974, to which I have already referred. From the records and proceedings of the instant case the following facts are undisputed, and stand admitted.
22. The shares in dispute in the instant case had not been valued by any of the authorities at any stage on any basis. Initially the matter was left to the IAC, Jodhpur, to make the said valuation but the same appears not to have been done. No doubt, in recording his reasons the WTO concerned had quoted the figure of Rs. 258.43 but there is no explanation nor any record to show how he arrived at this figure and by following what method. It is not clarified in his affidavit whether he followed any particular method of valuation in arriving at that figure. There is no finding by any of the authorities concerned that the shares of the said mill were notregularly quoted in the recognised stock exchange within the meaning of Rule 1A of the W.T. Rules. The correspondence disclosed the only record that the quotations are infrequent. It is not found or established that the quotations were not regular. The authorities seem to have equated the terms ' frequent ' with the term ' regular '. It also stands admitted that at no stage any of the. authorities obtained any information from the recognised stock exchange as to the quotation of the shares. In the case of Smt. Nirmala Birla : 105ITR483(Cal) [FB), there was a positive finding of the Special Cell that the shares in dispute were being manipulated in the stock exchange and their break-up value was higher than the value quoted in the stock exchange. There is no such finding in the instant case.
23. In the instant case, it appears that the WTO initiated reassessment proceedings by mechanically following the directions in the letter dated the 26th March, 1974, written by the ITO, Special Investigation Branch. The said letter further records that the WTO had detailed discussions with the Deputy Director, Investigation Special Cell and obtained detailed instructions. Nothing has been stated in the affidavit-in-opposition about such discussion and what further information, if any, the WTO received during such discussions and what further instructions were given to him. The said letter cannot be taken to be anything but a positive command of a superior officer to his subordinate to follow a particular course of action which the subordinate officer carried out. This conclusion is in consonance with the observation of the Supreme Court in Chintapalli's case : 1SCR563 . The letter was received on the 26th March, 1974. The reasons were recorded by the WTO on the same day and the notice of the WTO under Section 17 was also issued on the same day. It does not appear when and how the WTO applied his mind and in what manner he arrived at the valuation of the shares of Rs. 258.43 in respect of such shares. The contention of the assessee that the WTO in seeking to reopen the questioned assessment was proceeding on the basis of an alternative method of valuation is also not without substance. Whether frequently or not, the said shares were quoted. In the original assessment, the valuation of the said shares were accepted on the basis of quotations. The original assessment cannot be said to be illegal or incorrect. No doubt, if another method of valuation was adopted at the original assessment, e.g., the breakup method, a different valuation might have been arrived at, but solely on the basis of information that the shares are not frequently quoted in the stock exchange the WTO was not justified in adopting a different method of valuation and initiating reassessment proceedings on such basis.
24. For the reasons aforesaid, the petitioner succeeds in the instant case. A writ in the nature of certiorari will issue setting aside the said impugned notice dated the 26th March, 1974, and the proceedings and orders madepursuant thereto. A writ in the nature of mandamus will also issue directing the respondents not to give any effect or any further effect to the said notice and not to take any further steps in pursuance thereof.
25. The rule is made absolute to the extent as aforesaid.
26. There will be no order as to costs.
27. Operation of this order is stayed for four weeks.