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TMI Blog1984 (12) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... tified in holding that the reopening of the assessments was under section 17(1)(a) and not under section 17(1)(b) of the Wealth-tax Act, 1957, and reassessments were, therefore, not barred by limitation ? (2) Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that the lands held by the assessee within the limits of Visakhapatnam Municipality as on the relevant valuation dates were non-agricultural in character is correct and based upon the correct application of the tests laid down by the Supreme Court in the case of Officer-in-Charge (Court of Wards) [1976] 105 ITR 133 ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal is right in rejecting the assessee's contention that the right to compensation was a mere inchoate right and did not become an asset belonging to the assessee until the final determination of the proceedings under section 30 of the Land Acquisition Act rejecting the rival claims of others to the same compensation and also until the final determination of the proceedings under section 18 of the Land Acquisition Act determining the quantum of compensation payable for acquisition of lands ? (4) Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 40% thereof ? " D. Question referred at the instance of the Commissioner of Wealth-tax for the wealth-tax assessment years 1970-71 to 1973-74 (both years inclusive): " (9) Whether, on the facts and in the circumstances of the case and on a correct interpretation of the provisions of section 4(1)(iv)(a) read with the Explanation under section 4 of the Wealth-tax Act, the Tribunal is correct in holding that II 1. 72 acres of land was irrevocably transferred by the assessee to others and ceased to be an asset belonging to the assessee on the relevant valuation dates even though no registered deed of conveyance was executed by the assessee in favour of the transferees ? " It may be mentioned that wealth-tax assessments for the years 1965-66 to 1968-69 under consideration are reassessments made under 17 of the Act, whereas wealth-tax assessments made for the years 1970-71 to 1973-74 are regular assessments made under section 16(3) of the Act. It will be noticed that questions Nos. 5, 6 and 7 stated above at the instance of the assessee for the wealth-tax assessment years 1970-71 to 1973-74, are identical to questions Nos. 2, 3 and 4 referred at the instance of the assessee for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a substantial portion of the lands, the Wealth-tax Officer initiated proceedings under section 17 of the Act reopening the assessments. The Wealth-tax Officer served notices dated December 10, 1973, on the assessee under section 17 requiring the assessee to file the returns of net wealth for these assessment years. The assessee challenged the validity of the jurisdiction assumed by the Wealth-tax Officer under section 17 by filing Writ Petition Nos. 4003 to 4010 of 1974 in this court. The writ petitions were dismissed upholding the validity of the reassessment jurisdiction assumed by the Wealth-tax Officer. Against the order of the learned single judge dismissing the writ petitions, the assessee filed writ appeals bearing W.A. Nos. 608 to 615 of 1974. These writ appeals were disposed of by a Division Bench of this court on September 16, 1974. The appeals filed were dismissed affirming the decision of the learned single judge. It may be mentioned that the validity of the reassessment jurisdiction assumed by the Wealth-tax Officer by issuance of notices dated December 10, 1973, under section 17 of the Act was upheld basically on the ground that the assessee did not disclose in the we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returns were originally filed. The Tribunal also held that the assessee was entitled to receive compensation in respect of the lands acquired before the valuation dates corresponding to the assessment years mentioned above. The Tribunal rejected the assessee's contention that, because there were some disputes regarding the persons to whom the compensation should be paid and the extent thereof, the assessee should be absolved from the obligation to disclose the relevant particulars at the time when the original assessments were made. For these reasons, the Tribunal upheld the validity of the reassessment proceedings initiated under section 17(1)(a) of the Act. We are satisfied, on looking into the materials on record, that there was omission or failure on the part of the assessee to disclose fully and truly all the material facts in the wealth-tax returns originally filed by her. This was the basis on which the writ petitions and the writ appeals filed by the assessee were dismissed by this court. The Wealth-tax Officer rightly invoked the provisions of section 17(1)(a) of the Act. In fairness to the learned counsel for the assessee, it should be said that he did not seriously advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in character. The assessee filed a second appeal before the Tribunal reiterating the contention that the lands were agricultural in character. The Tribunal observed that an identical contention was urged by the assessee in connection with the income-tax assessment years 1966-67 to 1969-70. It would appear that the question whether the lands were agricultural in character had arisen before the income-tax authorities in connection with the liability to capital gains on the transfer of a portion of the lands under consideration. The Tribunal stated that, by its order dated January 31, 1979, disposing of the appeals in connection with the income-tax assessment years 1966-67 to 1969-70, it was held that the lands were not agricultural in character. For the same reasons, the Tribunal rejected the assessee's contention that the lands should be considered as agricultural lands for purposes of wealth-tax (vide paragraph 26 of the Tribunal's order). During the course of the hearing, learned counsel for the assessee furnished to us a copy of the Tribunal's order dated January 31, 1979, in connection with the income-tax assessment years 1966-67 to 1969-70 wherein the Tribunal had dealt with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... character. He urged that the attempts of the assessee to fabricate evidence in support of the contention that the lands were agricultural in character were successfully frustrated by the Revenue. It is submitted that there was no evidence at all that any agricultural operations were carried on the lands either before or after the purchase of the lands by the assessee. On the contrary, the evidence, according to the learned standing counsel, showed that the lands were unfit for cultivation and that, in fact, the lands were not put to use for agricultural purposes by the assessee. It is further submitted that the evidence was clinching that the assessee purchased these lands with a view to sell the same after the prices escalated and there was no intention at any time on the part of the assessee to use the lands for agricultural purposes. According to the learned standing counsel, this is not a case where there was a temporary cessation of the user of the lands for agricultural purposes, but a case of total non-user for agricultural purposes both before and after the purchase by the assessee. It is urged that the Revenue successfully rebutted the initial presumption that the lands we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the villages concerned testified that the lands held by the assessee were unfit for cultivation. They tried to resile from their original statements and endeavoured to support the assessee's version. The authorities below successfully demonstrated that the statements initially made by the Revenue Inspectors and the Village Karnams were correct. (ii) The affidavits of two villagers filed by the assessee before the Appellate Assistant Commissioner were considered to be irrelevant and inconsequential; firstly, these affidavits were not filed before the Wealth-tax Officer; and, secondly, the two villagers did not belong to the villages wherein the lands of the assessee were situate and also did not own and possess any lands in the villages. The Tribunal found that they did not have any personal knowledge of the matters and, therefore, their oral evidence to support the plea of the assessee's lands being put to agricultural use was not relied upon. (iii) The assessee's claim that he spent a sum of Rs. 1,50,000 for reclaiming waste land to make it useful for purposes of cultivation was found to be untrue. The Tribunal noticed that the assessee failed to make any claim before the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 13, 1971, concerning the claim for enhancement of compensation in Award No. 14 of 1968, the assessee claimed that the lands were fit (only) for building purposes and there were intending purchasers to purchase the land at Rs. 10 to 12 per sq. yard. (xi) In the report dated November 7, 1972, of preliminary valuation of the assessee's land acquired for the Port Trust, the following findings were recorded by the authorities: No cultivation or plantation is there nor is it possible to grow any crops in the area. The area is only fit for building construction and it is also being used for the same." Based on the above evidence, the Tribunal came to the conclusion that the Revenue successfully rebutted the presumption with reference to the " prima facie evidence " that the lands were agricultural in character. One has to ascertain the cumulative effect of the entire evidence led by the Revenue. The Wealth-tax Officer had conducted the investigations with meticulous care and attention and successfully frustrated the efforts of the assessee to support the plea of user of the lands for agricultural purposes with reference to fabricated evidence and by inducing persons to falsify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gemini Pictures Circuit P. Ltd. v. CIT [1981] 130 ITR 686 (Mad), CWT v. H. V. Mungale [1984] 145 ITR 208 (Bom), CIT v. Siddharth J. Desai [1983] 139 ITR 628 (Guj), Addl. CIT v. Tarachand Jain [1980] 123 ITR 567 (Pat), M. Ranganatha Sastry v. CIT [1979] 119 ITR 488 (Mad), Combined Industries (P.) Ltd. v. CIT [1978] 115 ITR 358 (Mad) and CIT v. Sutton Sons Ltd. [1981] 127 ITR 57 (Cal). It is not necessary to examine these cases, as eventually the decision in each of these cases turned out on the facts of each case. There is no dispute regarding the tests applicable for the determination of the lands as agricultural lands. We have ourselves briefly indicated the same above. Disputes arose in the application of these tests with reference to the particular facts of each case. So long as the tests are applied to the facts of a given case, the decision would govern only the facts of that particular case while the tests that are applied may offer useful guidance in other cases. We are satisfied that the Tribunal applied these tests correctly in coming to the conclusion that the lands were not agricultural lands. The total absence of evidence indicating the user of the lands for agricult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lth. This contention was rejected by the Wealth-tax Officer as well as in appeals by the Appellate Assistant Commissioner and the Tribunal. We are satisfied that the decision of the Tribunals below is correct. The fact that disputes subsisted on the valuation date is no ground to exclude from consideration the asset as such. The disputes may be relevant for the purpose of determining the valuation and have no effect whatsoever on the question whether the asset should be considered at all for wealth-tax purposes or not. We are informed that the right to receive compensation in respect of the lands acquired was valued by the Tribunal at 40%. In valuing the right at 40%, it must be said that all disputes subsisting on the valuation dates corresponding to the above wealth-tax assessment years were duly taken into account and the valuation fixed by the Tribunal. The Tribunal was right in rejecting the assessee's contention that the value of the right to receive compensation in respect of the above-referred awards could not be included in the wealth-tax assessments under consideration. Question Nos. 3 and 6 are accordingly answered in the affirmative, that is to say, in favour of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e detailed examination, as it is fairly settled. The assessee's right to receive compensation in respect of the lands compulsorily acquired under the Land Acquisition Act was valued by the Tribunal at 40% of the amount finally determined by the High Court in the land acquisition proceedings. It is urged that, on the valuation date corresponding to the assessment years under consideration, the assessee's claim for enhancement of compensation were pending final determination. The assessee carried the matter in reference under section 18 of the Land Acquisition Act and compensation was enhanced. Being dissatisfied with the compensation enhanced, the assessee carried the matter in appeal to the High Court. The Government was also unacceptable to the enhancement made by the courts and, therefore, filed appeals in the High Court for reducing the compensation enhanced by the courts. All these disputes were pending final determination on the valuation dates corresponding to the assessment years under consideration. In these circumstances, the Tribunal held that, while the right to receive compensation is itself an asset and is liable to be valued, its value should be estimated at 40% of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the land was already acquired for the Rail ways, Port Trust and other public purposes. After a few sales and compulsory acquisitions, the assessee was left with the following extent of land : Acres Marripalem village 62.91 Allipuram village 48.81 ------- Total 111.72 ------- The assessee claimed that, under an agreement dated July 15, 1968, she entered into an agreement with Smt. D. Suryavathi and nine others for the sale of the above-mentioned land for a consideration of Rs. 3,00,000. It is stated that, out of the consideration of Rs. 3,00,000, a sum Of Rs. 1,00,000 had been paid by way of advance at the time of the execution of the agreement dated July 15, 1968. It is further claimed that possession of the land was delivered to the agreement-holders on the date of the agreement. On these facts, the assessee claimed that the value of 111.72 acres of land forming part of the agreement dated July 15, 1968, could not be included in her wealth-tax assessments. The Wealth-tax Officer declined to accept the assessee's contention basically on the ground that, in the absence of a registered sale deed, the value of the lands has to be considered in the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of the value of II 1. 72 acres of land allegedly agreed to be sold under the agreement dated July 15, 1968. We have already referred to the fact that the Wealth-tax Officer valued these lands at Rs. 1,22,96,080 for each of the four assessment years under consideration and included the same in the net wealth. The Appellate Assistant Commissioner went into the question of valuation and determined the value of the lands for purposes of assessment at Rs. 31,62,000 giving a relief in valuation of Rs. 91,34,080. The assessee filed an appeal to the Tribunal challenging the correctness of the view of the Appellate Assistant Commissioner that the agreement dated July 15, 1968, was not genuine and that the value of the lands could be included in the net wealth of the assessee. The Tribunal, on a consideration of all the evidence on record, held that the agreement was genuine. The Tribunal considered the applicability of section 4(1)(a)(iv) of the Act and accepted the assessee's contention that, pursuant to the provisions contained in section 4(1)(a)(iv), the value of the lands could not be included in the wealth-tax assessments of the assessee. In that view, the Tribunal deleted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be urged before the High Court that the findings of the Tribunal are vitiated for one reason or the other. We may refer to the decision of the Supreme Court in India Cements Ltd. v. CIT [1966] 60 ITR 52. The following observations at page 64 of the Report are relevant: " ......in a reference, the High Court must accept the findings of fact made by the Appellate Tribunal and it is for the person who has applied for a reference to challenge those findings first by an application under section 66(1). If he has failed to file an application under section 66(l) expressly raising the question about the validity of the findings of fact, he is not entitled to urge before the High Court that the findings are vitiated for one reason or the other." This view has been reiterated by the Supreme Court in a number of decisions subsequently. In CIT v. Kamal Singh Rampuria [1970] 75 ITR 157 (SC), the Supreme Court observed (at page 161 of the Report) : " It is well established that the High Court is not a court of appeal in a reference under section 66 of the Act and it is not open to the High Court in such a reference to embark upon a reappraisal of the evidence and to arrive at findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would alone require to be considered by the High Court." We may mention that the same view was expressed by the Supreme Court in Aluminium Corporation of India Ltd. v. CIT [1972] 86 ITR 11. At page 13 of the Report, the Supreme Court observed : " If any party wants to challenge the correctness of the findings given by the Tribunal either on the ground that the same is not supported by any evidence on record or is based on irrelevant or inadmissible evidence or is unreasonable or perverse, a question raising any one of those grounds must be sought for and obtained. It is needless to say that the jurisdiction of the High Court in a reference under section 66 is only an advisory jurisdiction. That being so it can only pronounce its opinion on the questions referred to it. It is trite to say that it cannot sit as an appellate court over the decision of the Tribunal." We have perused the reference applications filed by the Revenue under section 27(1) of the Act before the Income-tax Appellate Tribunal. The Revenue failed to raise any specific question questioning the validity of the Tribunal's finding that the agreement dated July 15, 1968, was genuine. The Revenue did not requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l referred to some insignificant aspects of the matter and held that those aspects supported the genuineness of the agreement. All the same, we must point out that the Tribunal referred to all the evidence, pro and con, and held eventually that the agreement is genuine. It is not for this court to substitute its own judgment. The finding of fact recorded by the Tribunal is thus binding on this court and we have to answer question No. 9 on the basis that the agreement dated June 15, 1968, is genuine. We are also unable to accept the contention of the Revenue that the agreement dated July 15, 1968, should be held to be revocable within the meaning of section 4(1)(a)(iv) of the Act. Learned standing counsel for the Revenue drew our attention to clause 5 of the agreement which provided that " the vendor shall have a first charge over the land hereby sold for the balance of the sale consideration ". According to the learned standing counsel, this clause has the effect of giving the assessee a right to reassume power, directly or indirectly, over the whole or any part of the assets or income from the lands. It is necessary to refer to clause 8 of the agreement which reads as under: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belong to the assessee and consequently, the value of the lands was liable to be included in the net wealth and charged to wealth-tax under section 3 of the Act. Section 3 is the charging section which provides for the levy of wealth-tax in respect of the " net wealth " on the corresponding valuation date of every individual. Section 2(m) of the Act defines " net wealth " as the amount by which the aggregate value of all the assets belonging to the assessee on the valuation date is in excess of the aggregate value of all the debts owed by the assessee. The expression " assets " is defined in section 2(e) of the Act as including property of every description, movable or immovable. For purposes of determining whether the value of any asset should be included in the assessee's net wealth, all that is required to be seen is whether the asset belonged to the assessee on the valuation date. If the asset belonged to the assessee, then the value of such asset automatically forms part of the net wealth and is liable to be charged to wealth-tax under section 3 of the Act, subject, however, to other provisions contained in the Act conferring exemptions (see section 5) or other deductions as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the son's wife, or the son's minor child, of such individual, to whom such assets have been transferred by the individual, directly or indirectly, on or after the 1st day of June, 1973, otherwise than for adequate consideration, whether the assets referred to in any of the sub-clauses aforesaid are held in the form in which they were transferred or otherwise. " It is apparent that section 4(1) deals with the inclusion of certain categories of assets that do not belong to the assessee on the valuation date and yet they are included in the net wealth of the individual. A perusal of sub-clauses (i), (ii), (iii), (iv) and (v) above referred to unmistakably indicates that all the categories of assets referred to in the above sub-clauses do not belong to the assessee on the valuation date, because they were transferred by the assessee to some other persons. As such assets were transferred, they cannot be held to belong to an assessee on the valuation date. Even so, power is conferred on the Wealth-tax Officer to include the value of such assets in computing the net wealth. It would thus be seen that sections 3 and 4 of the Act operate in different directions. Section 4 is designed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Wealth) Trust [1977] 108 ITR 555 (SC), the Supreme Court referred to, with approval the judgment of the Gujarat High Court in Manna G. Sarabhai's case [1972] 86 ITR 153 and to the observations of Lord Macnaghten referred to above (pages 590-591 of the report). In the present case, the agreement dated July 15, 1968, did not divest the assessee of ownership of the lands. Her obligation to execute a sale deed and convey title to the agreement-holders, in pursuance of the agreement, arises only when the sale consideration was paid to her in full, as specifically provided in clause 6 of the agreement. It must be remembered that, if there was failure on the part of the agreement-holders to pay the consideration, the assessee was under no obligation to execute the sale deed conveying title to the agreement-holders. It must, therefore, be said that the assessee continued to be the owner of the lands covered by the agreement dated July 15, 1968, and, in that sense, the lands belonged to her on the valuation dates corresponding to the assessment years under consideration. The value of these lands so belonging to her would certainly form part of her net wealth and would be liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee's contention that section 4(1)(a)(iv) has any application to the facts of the present case. Finally, Sri Dasaratharama Reddy, learned counsel for the assessee, contended that even in the view that chargeability arises straightaway under section 3 of the Act, still the provisions contained in section 53A of the Transfer of Property Act come into operation in the present case and, consequently, it must be held that the assessee was not the owner of the lands covered by the agreement dated July 15, 1968, and, therefore, the lands did not belong to the assessee. We do not agree. An identical contention was raised in CIT v. Nawab Mir Barkat Ali Khan [1974] Tax LR 90 (AP) above referred to and this court repelled that contention. All that section 53A of the Transfer of Property Act provides is that the transferee can defend his possession under the doctrine of part-performance. It creates no real right and much less deprives the transferor of the ownership of the lands. Section 53A is no answer to the legal position that the assessee continued to be the owner of the lands and the lands, therefore, continued to belong to her. Even otherwise, we are satisfied that the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in the negative, that is to say, in favour of the Revenue and against the assessee. Learned counsel for the assessee represented that, in the view that the value of the lands did not fall to be included in the net wealth of the assessee under section 4(1)(a)(iv) of the Act, the Tribunal did not go into the question of valuation of the lands as upheld by the Appellate Assistant Commissioner. Learned counsel requests that we should give a direction to the Appellate Tribunal to go into this question now. There is no indication in the Tribunal's order whether the grounds of appeal filed by the assessee against the order of the Appellate Assistant Commissioner included the ground against the valuation of the lands sustained by the Appellate Assistant Commissioner at Rs. 31,62,000 and, even if such a ground was included, whether the assessee pressed the ground for consideration of the Tribunal at the time of hearing. In the absence of any indication on the above points, we cannot straightaway give any direction to the Appellate Tribunal to consider the question regarding the valuation of the lands. The Tribunal will, however, look into the grounds of appeal and other connected pap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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