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TMI Blog1980 (2) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that this is a misuse of s. 16A by the revenue and beyond jurisdiction. This bunch of 11 writ petitions are aimed at closing the deep openings in s. 16A by reopening notices of s. 17 and further penetrating the very existence of jurisdictional facts of " reason to believe " under cl. (a) and "information" under cl. (b) of sub-s. (1) of s. 17 of the W.T. Act (for short, " the Act " hereafter). 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 s. 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 s. 17 issued to Smt. Kanwarani Nawal Kanwar by the WTO, A-Ward, jodhpur. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e WTO assessed the net wealth of the assessee for the assessment year 1969-70, after notice was given to the petitioner under s. 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 of the 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. On March 4, 1978, the WTO issued notice to the petitioner-assessee under s. 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 s. 17, sub-s. (1), cl. (a), of the Act. 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. In all the cases of Anandkumari, the facts are identical except that the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gest that the value was incorrect and that being so, the assessments could not be reopened on a mere change of opinion. 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 s. 17 of the Act. After the above reply of the revenue, the petitioner filed the writ application on May 19, 1978. 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-1, 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 s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete and such assessment has also not been reopened under s. 17 so far. Our attention was invited to the language of s. 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 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. " The learned counsel for the revenue, on the contrary, submitted that no such limitations and fetters, as argued by the learned counsel for the petitioners, can be seen in the language of s. 16A and the word " assessment " is comprehensive enough to include all proceedings of asessment, reassesment and for reopening the completed assessment. According to him, proceedings for reopening under s. 17 of the Act are nothing but continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded us valuable assistance. If, after the filing of reports, the counsel for the revenue would have submitted any objections, this court would have considered them and decided 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 otherside has left the stand of the revenue unintelligible. 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. The docks are now clear to examine the correctness of the submission of Mr. Mehta regarding the non-applicability of s. 16A for reopening of assessment under s. 17 of the Act. There is no doubt that the phrase used in s. 16A is " for the purpose of making an assessment ". The definition of assessment contained in s. 2(ca) shows that it includes reassessment. It defines assessment as " assessment includes reassessment ". On a plain reading of the definition of assessment, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he does not form any such opinion that it has been correctly declared, then the course open to him is laid down is sub-ss. (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-ss. (4) and (5) has been followed and order has been passed under sub-s. (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 s. 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 s. 16A cannot be exercised by the WTO. " We would first like to examine the legislative history of this section. Section 16A was introduced, vide s. 10 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 s. 16A(3) and send one copy of the order to the WTO and another to the assessee. An order under s. 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 s. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prosecution of registered valuers also in certain circumstances. 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 s. 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 s. 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 completed assessment, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which, according to him, are undervalued, looking to the fair market value or as per the standards laid down in cl. (a) or cl. (b) of sub-s.(1). 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 s. 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. 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affairs as to reduce the brunt of taxation to a minimum. " 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. " Such avoidances have been supported from the observation of Lord Atkin in Duke of Westminster v. IRC [1935] 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. " 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. It is not for this court to hold that in the wisdom of the legislature, why the reference to Valuation Officer under s. 16A was not permitted for the purpose of considering the case for reopening under s. 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 s. 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 s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In substance, s. 16A curtails the jurisdiction of the WTO under s. 17(1) to ascertain the price of any asset. Once the WTO chooses to make reference to the Valuation Officer, the valuation of the property made by the Valuation Officer is to be accepted by the WTO. A combined reading of sub-s. (1) and sub-s. (6) of s. 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 permissible under cl. (b) of sub-s. (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 cl. (b) or cl. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence made under s. 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 s. 16A cannot be sustained and are liable to be quashed on this ground alone. Thus, we are inclined to accept the contention of Mr. Mehta on plain reading, analysis and discussion of the implications, both legal and logical of the various sub-sections of s. 16A, the most important being sub-s. (1) and sub-s. (6) as mentioned above. Sub-section (1) provides the opening gate of jurisdiction and sub-s. (6) is the closing door of the same. In a case of mere consideration for giving or not giving notice under s. 17(1)(a) or (b) neither sub-s. (1) permits the entry or excess for invoking jurisdiction and that being so, the question of a closure under sub-s. (6) can never arise, because it would be a case of a " still born child ". Exhibit R-1 order for issuing notices under s. 17 to the petitioners in all the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-1 is conspicuously silent; it only 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. 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 art. 265 that no tax can be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a thing is to be done in particular manner it must be done in that manner or not at all. Other modes of compliance are excluded. " We respectfully follow the above principle of law enunciated by the Supreme Court and hold that since the valuation report under s. 16A cannot be obtained for the purpose of deciding the question whether a completed assessment should be reopened or not on the ground that s. 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 s. 16A and permitting the same effect even after holding that under s. 16A neither this report can be called nor it can be used. 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 s. 17 of the Act for reopening the completed assessments of the assessees for the years mentioned therein are quashed. In the three writ petitions notices have been issued on March 7, 1978, to Nawal Kanwar under s. 17(1)(a) of the Act for reo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong assumption of the fact that the provident fund vested in the Government. However, an auditor, who gives a note that the valuation of the house property made by the officer under s. 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 jurisdiction 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 s. 17(1)(b). The Madras High Court in Adityan v. First ITO [1964] 52 ITR 453, 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 [1942] 10 ITR 152 (All) also. 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 s. 17(1)(b) as reopening can be done only in those matters about which definite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible 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." One of the exceptions to the above settled judicial opinion is the case of R. K. Malhotra, ITO v. Kasturbhai Lalbhai [1977] 109 ITR 537 (SC), 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, s. 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." It may be mentioned now that the above discussion is in relation to the use of the audit report as information under s. 17(1)(b) and the earlier view of the hon'ble Supreme Court in R. K. Malhotra's case [1977] 109 ITR 537 (SC), now stands altered by the subsequent judgment in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC), wherein it has been expressly held that information of an internal aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titutional 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. That being so, we are satisfied that in the facts of these cases a bald reference in Ex. R-1 to the audit report, which is certainly non-statutory and is a sort of objection by an auditor, cannot provide the existence of reasonable belief that on account of the failure of the assessee to disclose the material facts truly and fully, the wealth has escaped assessment. 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, sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the WTO that the petitioner has failed to disclose truly and fully material facts; and in a case covered by s. 17(1)(b), whether they can be a good and valid information for holding that wealth has escaped assessment. 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 Supreme Court, the first and foremost being the basic important judgment of Calcutta Discount Co. v. ITO [1961] 41 ITR 191 (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 ? " In CIT v. Bhanji Lavji [1971] 79 ITR 582 (SC), it was held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. bad 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. " 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be held in good faith. It cannot be merely a pretence. " Lastly, in the latest case of Parashuram Pottery Works Co. v. ITO [1977] 106 ITR 1, 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 in working 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9] 118 ITR 134 (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. " Jaswant Rai v. CWT [1977] 107 ITR 477 (P & H) contained the following observations (p. 481): "In Commissioner of Income-tax v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC), it was held by the Supreme Court that if the language of 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." 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 Valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that they are irrelevant to the controversy in this case. He relied upon the judgments reported in R. Dalmia v. Union of India [1972] 84 ITR 616 (Delhi) and Assistant CED v. Nawab Sir Mir Osman Ali Khan Bahadur [1969] 72 ITR 376 (SC). In Kantamani Venkata Narayana and Sons v. 1st Addl. ITO [1967] 63 ITR 638 (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. " The question of jurisdiction of this court under art. 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 Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Officer were 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. " 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 [1969] 72 ITR 376 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imary 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 t he 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 made further investigation or additions or referred the matter to the Valuation Officer tinder s. 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 him 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 s. 17(1)(a) of true material facts. It cannot be said that the WTO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cl. (a) or the information under cl. (b) of s. 17(1) and, therefore, we have concentrated only on the enquiry whether any 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 s. 17(1)(a) and further that there is no information in the eye of law showing that wealth has escaped assessment in these cases as required by s. 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 s. 16A obtained for the purposes of considering the question of reopening is non est, illegal, void and invalid ab initio because s. 16A cannot be used for it. So far as the third submission of Mr. Mehta based on the judgments of ITO v. British Paints India Ltd. [1979] 118 ITR 878 and Durga Sharan Udho Prasad v. CIT [1976] 103 ITR 270 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. The net result of our above discussion can be summarised as follows: (1) That s. 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 s. 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 s. 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 s. 17 are based on the audit objections which cannot provide a ground for " reason to believe " that wealth has escaped assessment on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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