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TMI Blog1979 (7) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... lly in his assessment order was as follows: " Value of property at 9-A, Vallabhai Road, Chokkikulam, Madurai, including vacant site Rs. 3,00,000 The value taken for the above property in the estate duty account is Rs. 1,50,000. According to the wealth-tax assessment of the deceased, the value of the property was taken at Rs. 5,05,784. This property was a nursing home which was run by the deceased during his lifetime. On account of the failing health of the deceased this property was leased out to a firm consisting of M/s. Kasirajan and others. The lease was for a period of three years from July 1, 1971, for a monthly rent of Rs. 1,000. The deceased died on March 26, 1972. At the time of the death of the deceased, the unexpired portion of the lease was about twenty-seven months. The accountable person has, therefore, reduced the value of the property to Rs. 1,50,000 taking into account the monthly rental of Rs. 1,000 and the unexpired portion of the lease. Reliance is placed in support of the valuation on the commentary of D. R. Gupta on the Estate Duty Act. The same property has been valued on October 3, 1973, by an approved valuer at Rs. 3,46,372 including land and build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om July 1, 1971, to June 30, 1974, on a rent of Rs. 1,000 per mensem, that Dr. Vadamalayan died within nine months of the date of the lease and the property was subject to a leasehold right for a period of about 27 months after the date of death of Dr. Vadamalayan and the respondent adopted 25 times the annual rent and arrived at the value of the property as Rs. 3,00,000 taking into account the fact that the income of Dr. Vadamalayan from this property was dwindling from year to year on account of his ill-health, namely, it was Rs. 75,796 in 1969-70, Rs. 58,529 in 1970-71, Rs. 22,005 in 1971-72, Rs. 22,598 in 1972-73 and Rs. 3,349 in 1973-74 and that, therefore, the popularity of the nursing home had gradually dwindled due to the sickness of Dr. Vadamalayan who is stated to have been suffering from cancer. The grounds urged are that: (1) The respondent had been compelled to issue the impugned notice on the basis of the audit objection, although the respondent had, prior to the date of the impugned notice, informed the higher authorities that there was no reason to reopen the assessment and the Controller, to whom the audit report was submitted had overruled the respondent's objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us, where we are concerned with buildings with compounds in a city, which buildings are in the possession of tenants and the tenants cannot be either evicted or the rent payable by them enhanced except in accordance with the provisions of the Rent Control Act, the only appropriate basis is to capitalise the annual rent by certain number of years' purchase ...... In T. Radhakrishna Chettiar v. Province of Madras [1948] 2 MLJ 159, a Division Bench of the Madras High Court laid down that the proper method of valuation to be adopted in case of compulsory acquisition relating to a house and ground situated in municipality and fetching regular income is to assess the value on the basis of capitalisation of the net annual income. The number of years' purchase to be adopted in capitalisation has to be arrived at by taking into account the interest yielded by the Government securities at the time of the notification under s. 4(1) of the Land Acquisition Act ...... The Appellate Tribunal is competent to decide both questions of law as well as fact. It is the final fact-finding body. If the Tribunal in its discretion has come to the conclusion that, on the facts of this case, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... improper in such cases. The learned judges of the Mysore High Court have observed that the Tribunal was competent to decide the question of fact and if in its discretion it has come to the conclusion that on the facts of the case the rental basis is the proper basis, they see nothing illegal about it. In the present case also the respondent was competent to decide the question of the value of the property in question, as question of fact, and taking into consideration the fact that the property was subject to a lease on a rent of Rs. 1,000 per mensem at the time of death of the deceased, he held that it must be valued at Rs. 3,00,000 on the basis of the 25 years' purchase. In the circumstances, it could not be stated that there is anything illegal about it. The most important question for consideration in this writ petition is whether the audit report, on the basis of which admittedly the notice for reopening the assessment already completed has been issued, would constitute information contemplated in s. 59(b) of the Act. The records show that the IAC (Audit), Madras, had sent the letter D.O. No. 772B(249) Aud/76 dated March 28, 1977, informing the respondent that the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dren of the assessee. Their Lordships of the Supreme Court have observed (P. 244): "The documents of 1957 conform to those of 1950 in material particulars; the trust deeds of 1957 only repeat what the deeds of 1950 had disclosed. Non-production of the documents executed in 1957, at the time of the original assessments, cannot, therefore, be regarded as nondisclosure of any material fact necessary for the assessment of the respondent for the relevant assessment years. The High Court was right in holding that the Income-tax Officer had no valid reason to believe that the respondent had omitted or failed to disclose fully and truly all material facts and consequently had no jurisdiction to reopen the assessments for the four years in question. Having second thoughts on the same material does not warrant the initiation of a proceeding under section 147 of the Income-tax Act, 1961." In the present case also the respondent has been made to have second thoughts regarding the valuation of the property which, to his knowledge, at the time of assessment had been valued at Rs. 5,05,784 for the purpose of wealth-tax. In Kalyanji Mavji Co. v. CIT [1976] 102 ITR 287 (SC) it has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any person who knows the fact or it may be obtained even from the record of the original assessment proceedings; and (7) that 'information' not amounting to change of opinion as to the correct state of law may be received from research of law made by the Income-tax Officer or it may be received from an external source; if, however 'information' as to the correct state of law is received from an external source, it must be derived from the judicial decision of a person, body or authority competent and authorised to pronounce upon the law... It would thus appear that the 'information' which the Income-tax Officer received subsequent to the original assessment was as to the correct state of the law and that it was received from the report of the audit department. The information as to the true and correct state of the law was not derived from any research made by him or from any judicial decision of a competent authority but it was received entirely from the report of an administrative authority. Having regard to the clear pronouncement of law in Kasturbhai Lalbbai's case [1971] 80 ITR 188 (Guj) and in Kalyanji Mavji Co.'s case [1976] 102 ITR 287 (SC), such report would not con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the previous assessment on a proper investigation of the materials on the record or the facts disclosed thereby, would not make it any the less information if the fact was not in fact obtained and came to his knowledge " only subsequently. So also the fact that on a research as to the state of law the Income-tax Officer would have ascertained the true legal position would not make any difference if the officer came to know the real position of the law only subsequently. The decision of a court of law subsequent to the assessment would be 'information' and the Income-tax Officer is entitled to take note of it." The decision that the audit report was "information " in that case was rendered having regard to the facts of that case and would not apply to the facts of the present case where the information, namely, that the property had been valued at Rs. 5,05,784 for wealth-tax purposes did not come to the knowledge of the respondent for the first time only after he received the audit report but it was already within his knowledge and had been specifically referred to in his original order of assessment: The learned counsel for the respondent submitted that pointing out an inadv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1957, was information within the meaning of that expression as used in section 34(1) of the Indian Income-tax Act, 1922, and, consequently, the reopening of the assessment under that provision was not illegal." This decision will not apply to the facts of the present case where the information was not gathered by the respondent for the first time after the original order of assessment was made, from the records or from any external source, but was available to him and has been specifically referred to by him in his original order of assessment, as stated earlier. The next decision relied upon by the learned counsel for the respondent is of a Division Bench of this court in CIT v. Rathinasabapathy Mudaliar [1964] 51 ITR 204. It has been held in that decision that information contemplated by s. 34(1)(b) of the Indian I.T. Act, 1922, which gives jurisdiction to I the ITO to reopen an assessment, is information that income, profits and gains chargeable to income-tax had escaped assessment in the assessment of the assessee. Even inadvertence or error in the making of assessment would bring a case within s. 34(1)(b) and if an error is discovered after the assessment was made, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second respondent who issued the notice under section 147 of the Income-tax Act that there is no room for making a revised assessment as proposed by him and that he, having decided earlier the status, cannot change his opinion and make a revised assessment on the estate of Kumaraswami Mudaliar in the status of a Hindu undivided family. We have to, therefore, hold that this writ petition is premature. Further, the matter involves investigation of facts. The proper thing for the petitioner is to go before the second respondent and put forward his objections and if ultimately any adverse orders are passed against him by the second respondent, he can challenge that order in appropriate proceedings." On the other hand, a number of decisions have been relied upon by the learned counsel for the petitioner in support of the contention that the petition under art. 226 of the Constitution would lie for quashing the impugned notice. The first of those decisions is of the Supreme Court in Madhya Pradesh Industries Ltd. v. ITO [1965] 57 ITR 637. In that case, on December 26, 1960, the ITO issued a notice to the petitioner-company in exercise of the powers under s. 34 of the Indian I.T. Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from them. The Assistant Commissioner had been invested with the powers of the Commissioner under that Act. It was submitted that the impugned notice was not an " order ", not being the formal expression of any decision, and that nothing final was decided by the same. The learned judge has observed (p. 474): " The impugned notice, not being either an assessment or order, finally determining the rights of the said petitioner, is not revisable ...... and, as such, Mr. Chakravartty is right in his submission that the present provisions of article 226(3) would not be a bar in maintaining the petition, the more so when the impugned notice or order in annexure B would not come within the category of the orders as mentioned in the several clauses of subjection (3) and of sub-section (4) of section 20 of the said Act. Thus, the preliminary point as raised by Mr. Dutta fails. " The learned judge issued a writ directing the respondents in that case, to quash and not to give effect to the impugned notice or order in annex. or to act on the basis thereof. The third decision relied upon by the learned counsel for the petitioner is of the Supreme Court in CIT v. A. Raman and Co. [1968] 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade notice could be challenged, the learned judges have observed in their, decision thus (p. 130): " In Orient Paper Mills V. Union of India, AIR 1969 SC 48 at p. 51, their Lordships in terms held: If the power exercised by the Collector was a quasi-judicial power as we hold it to be that power cannot be controlled by the directions issued by the Board. No authority, however high placed, can control the decision of a judicial or quasi-judicial authority. That is the essence of our judicial system. There is no provision in the Act empowering the Board to issue directions to the assessing authorities or the appellate authorities in the matter of deciding disputes between the persons who are called upon to pay duty and the department. It is true that the assessing authorities as well as the appellate authorities are judges in their own cause ; yet when they are called upon to decide disputes arising under the Act they must act independently and impartially. They cannot be said to act independently if their judgment is controlled by the directions given by others. Then it is a misnomer to call their orders as their judgments; they would essentially be the judgments of the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worded and does not place any restraint or restriction on the High Court in the exercise of its jurisdiction under the article. Even the territorial limitation which originally existed has since been removed ...... The powers are, how ever, discretionary in character, so that in particular cases, no question of legality or lawfulness of the exercise of the jurisdiction can properly arise but the question would be whether, in the particular circumstances, the court should exercise its discretion and invoke its powers. In the nature of things that consideration will have to be applied in the context of the circumstances in each case. If the court feels that the circumstances and exigencies of the case taken as a whole require that the court should exercise its power, it will do so... Existence of an alternative remedy, which is adequate or otherwise, may not, however, always stand in the way of this court exercising its jurisdiction if other considerations outweigh. But, normally speaking, existence of an alternative remedy is a strong dissuading factor when powers under article 226 are invoked. Where a right of appeal is given by a statute from an order, of which a party may feel ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stage when the Income-tax Officer issued the notices he was not acting judicially or quasi-judicially and so a writ of certiorari or prohibition cannot issue. It is well settled however that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions to prevent such consequences. Mr. Sastri mentioned more than once the fact that the company would have sufficient opportunity to raise this question, viz., whether the Income-tax Officer had reason to believe that under-assessment had resulted from non-disclosure of material facts, before the Income-tax Officer himself in the assessment proceedings and, if unsuccessful there, before the appellate officer or the Appellate Tribunal or in the High Court under section 66(2) of the Indian Income-tax Act. The existence of such alternative ..... X X X X Extracts X X X X X X X X Extracts X X X X
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