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TMI Blog1971 (11) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... te Duty on March 29, 1966. The values of these lands for the purpose of computing the estate duty in respect of the properties that passed on the death of Rashid Shapoor Chenai were taken at the respective figures of compensation awarded for them by the Special Deputy Collector, The legal heirs of Rashid Shapoor Chenai did not accept the awards made by the Special Deputy Collector in respect of those lands and objected to the amount of compensation awarded, and, accordingly, required the Special Deputy Collector, by applications filed within the time prescribed, to refer the matter of the determination of compensation, under section 18 of the Land Acquisition Act, to the civil court. References were, accordingly, made and the civil courts, by their orders of March 6, 1967, enhanced the compensation awarded by the Special Deputy Collector in respect of Moosapet land by Rs. 1,90,000, and by its order dated October 30, 1967, enhanced the compensation in respect of Qutbullapur lands by Rs. 20,45,000. On coming to know that the civil courts had enhanced the compensation in respect of those lands, the Assistant Controller of Estate Duty issued notice to the legal representatives of Ras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the legality of the said notice dated November 14, 1969, issued by the Assistant Controller of Estate Duty under section 59(a) of the Act, for reopening the assessment. The petitioner contends that the said notice is illegal and without jurisdiction. The petitioner, accordingly, prayed for the issue of a writ of prohibition or direction against the respondent restraining him from taking further proceedings in pursuance of the above-said notice. The learned counsel for the petitioner, Sri Y.B. Anjaneyulu, raised two contentions before us. They are : (1) no property chargeable to estate duty has escaped assessment ; and (2) even assuming that property chargeable to estate duty has escaped assessment, still the notice dated November 14, 1969, issued by the Assistant Controller of Estate Duty under section 59(a) of the Act is illegal and without jurisdiction, because such escapement is not due to any omission or failure on the part of the accountable person to disclose fully and truly all material facts necessary for making the assessment. Sri P. Rama Rao, the learned counsel appearing for the revenue, contended to the contra. Developing his arguments, the learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the references to the civil courts against the awards made by the Special Deputy Collector, still it was submitted that it was only an inferential fact. The Assistant Controller of Estate Duty should have inferred that fact from the facts before him disclosed by the accountable person and it was not for the accountable person to disclose that fact. Nor was that fact a material fact necessary for making the assessment, because by the mere filing of references the accountable person could not expect the allowance of an enhanced compensation. Therefore, there was no omission or failure on the part of the accountable person to disclose fully and truly all the material facts necessary for making the assessment. When once the notice to reopen the assessment was issued under section 59(a) of the Act, and when the jurisdictional fact that there was omission or failure on the part of the accountable person to disclose fully and truly all material facts necessary for making the assessment, was not established, this court cannot convert the said notice into a notice under section 59(b) of the Act and justify its legality and validity. In support of this argument, the learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, there was omission or failure on the part of the accountable person to disclose fully and truly all material facts necessary for making the assessment. That fact was a material fact and it could have put the Assistant Controller of Estate Duty on his guard not to accept the compensation awarded by the Special Deputy Collector as the real and true market value of those lands. in view of the large difference between the compensation awarded for those lands by the Special Deputy Collector and the civil courts, it is obvious that the figures adopted by the Assistant Controller of Estate Duty in the estate duty assessment for the prices of those lands were far below their real and true market value. Therefore, the property chargeable to tax had escaped assessment by reason of under-valuation of those properties. Even assuming for a moment that there was no failure or omission on the part of the accountable person to disclose fully and truly all material facts necessary for making the assessment, still the department was not bound to disclose under what sub-section of section 59 of the Act the notice has been issued, and if issued under section 59(a), it could be converted into one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereto." On a plain reading of the above section, it is evident that in order to confer jurisdiction on the Assistant Controller of Estate Duty to re-open an assessment under section 59(a) of the Act, two conditions have to be satisfied. The first is that the Controller of Estate Duty must have reason to believe that property chargeable to estate duty has escaped assessment by reason of under-valuation of the properties included in the account. The second is that he must also have reason to believe that such under-valuation has occurred by reason of the omission or failure on the part of the accountable person to disclose fully and truly all material facts necessary for making the estate duty assessment. Both the conditions are conditions precedent to be satisfied before the Collector of Estate Duty could have jurisdiction to issue a notice under section 59(a) of the Act. From what has been held by the Supreme Court in Calcutta Discount Ltd. v. Income-tax Officer and Banji Lavji v. Commissioner of Income-tax, which was upheld by the Supreme Court in Commissioner of Income-tax v. Bhanji Lavji it follows that the duty of the accountable person is to disclose only the primary facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fact was disclosed to it. We are not going to decide the disputed questions of fact in this writ petition. Hence, we will proceed on the basis that the accountable person failed to establish that she had disclosed to the Assistant Controller of Estate Duty, at the time of making the assessment, that references against the awards of the Special Deputy Collector were filed in the City Civil Court. However, the question is as to whether the fact of filing the references against the awards in the City Civil Court was a primary, or a material fact, or merely an inferential fact. If it was a primary fact, the duty lay on the accountable person to disclose it to the Assistant Controller of Estate Duty but if it was an inferential fact, no duty lay on the accountable person. to disclose it to the Assistant Controller of Estate Duty. Hence, the question of failure or omission on the part of the accountable person to disclose that fact, in the latter case, resulting in escapement of property from assessment on the ground of under-valuation, would not arise. To find out whether the above fact was a primary fact or an inferential fact, we lay down one test, and that is, if it had been discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llector has been enhanced by Rs. 20,45,000 in the case of lands acquired for H.M.T. and by Rs. 1,90,000 for the lands acquired for the synthetic drugs project. Those facts, which came into existence subsequent to the making of the assessment, lead to the conclusion that the values adopted by the Assistant Controller of Estate Duty for those lands were far below their real and true market value. In Kantamani Venkata Narayana & Sons v. First Additional Income-tax Officer, Rajahmundry, where it appeared from the affidavit of the Income-tax Officer that considerable increase since 1938, in the investments in the money-lending transactions of the assessee and in its wealth, had been discovered, and the increase in wealth was wholly disproportionate to the known sources of income of the assessee and no attempt was made by the assessee to furnish some reasonable proof of the source of additional wealth, the Supreme Court held that the Income-tax Officer had, prima facie, reasons to believe that the assessee had omitted to disclose fully and truly all material facts and that, in consequence of such non-disclosures, income had escaped assessment and he had, therefore, jurisdiction to issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Supreme Court in Kantamani Venkata Narayana & Sons v. First Additional Income-tax Officer, Rajahmundry. Although it is not necessary for us to record our final finding whether there has been an under-valuation of the properties included in the account or not, it is necessary for us to find out whether there exist circumstances in this case from which the Assistant Controller of Estate Duty could come to a reasonable belief that there was under-valuation of properties included in the account. The right to receive market value on the dates of notifications as compensation for the lands acquired by the Government for a public purpose, or for a company, springs directly from the acquisition of the lands. We are unable to accept the contention of the learned counsel for the accountable person that, for the first time, the right to receive the extra compensation was created when the civil courts pronounced their orders. The right to receive market value as compensation for the lands which were acquired came into existence as soon as the lands were acquired. That right was "property". As a matter of fact, the word "asset" under the Wealth-tax Act has been defined, in section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion accrued to the assessee on July 12, 1956, which was the date of the order of the district judge. On appeal, the Income-tax Appellate Tribunal held that the enhanced compensation accrued to the assessee on June 23, 1954, when the land was taken by the Collector and, accordingly, allowed the department's appeal. The learned Chief justice, speaking for the court, observed that : ". . . . On a consideration of the nature of acquisition proceedings, it appears to us that when lands are notified to be taken by the Government under the Land Acquisition Act, the owner of the land is entitled to payment of compensation at the market value on the date when possession was taken pursuant to a notification under section 3 of the Hyderabad Land Acquisition Act. It may be stated that on the date when land is taken possession of by the Government, no compensation has in fact been determined, but it has become only payable. The right of the owner is, therefore, an inchoate right. It is like, to borrow a term applicable to movable properties, a chose-in-action, i.e., a present right to take proceedings to recover a debt or damages, and thus inchoate in the sense that the compensation has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot affect the interests of the revenue. At the same time, it safeguards the assessee and prevents harassment. To hold otherwise would be contrary to the provisions of law." The question that was considered by this court in Khan Bahadur Ahmed Alladin's case , was as to which was the date on which profit arose or accrued to the assessee out of the acquisition of the lands by the Government, and in which assessment year these profits were taxable. For bringing the income to tax, it must have accrued or arisen to an assessee during the relevant accounting year. The learned judges who decided the above case observed that in the relevant accounting year the right to get the compensation at the enhanced rate was inchoate, that is to say, in the relevant accounting year, the learned judges explained, the compensation had not been determined or had become payable. In the Estate Duty Act, the question does not turn on the meaning of the word "accrual" or "arising". The question that arises under the Estate Duty Act is whether, on the death of the deceased, there was a right to receive compensation for the lands acquired by the Government, and whether it was a debt owed by the Government to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed ? Since the deceased, by the time of receipt of the compensation, had died, the compensation was payable to the heirs of the deceased in their capacity as the heirs of the deceased ; that is to say, the compensation that was payable to the deceased for the lands belonging to the deceased which were acquired by the Government was paid to the heirs of the deceased because of the death of the deceased. Similarly, the decision of the Calcutta High Court in Commissioner of the Wealth-tax v. U. C. Mahatab does not render any assistance to the accountable person. In the case under consideration of the Calcutta High Court, the question arose whether on the valuation date the assessee had a right to receive compensation from the Government in respect of the zamindari estate which vested in the Government under the provisions of the West Bengal Estates Acquisition Act, 1953. The learned Acting Chief justice, P. B. Mukherjee, speaking for the court, pointed out that the provisions of the West Bengal Estates Acquisition Act were not in pari materia with the provisions of the Madras Estates Abolition Act, and the right to receive compensation under the West Bengal Zamindari Acquisition Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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