1985 PLP 728 (PTD)

It is common ground that the "long list of sale instances" referred to in para8.3.3., the "statistical data available in the office", as also the rates with the specification. followed for the buildings, etc. referred to in paras. 8.3.4. and 8.3.5. were never put to the assessee at any time before passing Exhs. R. 2 (A) and R. 2 (B) final orders. On the face of it, failure to do so, violates the principles of natural justice. Moreover, the conclusion of the 2nd respondent to the effect, that "the sale instances given icy the assessee, are not the real market value of Ernakulam", "there may be stray cases of sales which may be tenanted property sold to the same tenant or disposed of to near relatives or gifted to wife or children," was arrived by totally ignoring the fact that one of the documents relied on by the assessee in the annexure to the objection filed on 21‑3‑1.983, is the Land Acquisition Proceedings of the G. C. D. A. and the award dated 11‑6‑1980. That is. an award passed by a. public authority. It has to be presumed that the amount awarded in L. A. proceedings represented the market value at the relevant date unless there are cogent materials to the contra. To say casually that the property (even the one acquired by the Greater Cochin Development Authority) did not reflect the market rates of Ernakulaun or that the sales may be of tenanted property sold to the same tenant, or disposed of to near relations or gifted to wife or children, is really a non‑application of mind by the 2nd respondent in the facts and circumstances of this case, Nothing has been ascertained or said about the other four documents also referred to in the annexure. It is unknown as to why they are discarded. It is obvious that the 2nd respondent has acted mechanically. He did not apply his mind to the vital aspects arising in the case. The observations contained in para. 8.3.3. are of a general and sweeping nature, lacking in precision or application of the judicial mind and perhaps disposing of arbitrarily the materials placed by the petitioner before the 2nd respondent.

5. The provisions of section 16‑A of the Wealth Tax Act are relevant in this context :‑ "16‑A (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 a Valuation Officer‑ (a) its a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer, if the Wealth‑tax Officer is of opinion that the value so returned is less than its fair market value ; (b) in any other case, if the Wealth‑tax Officer is of opinion‑ (i) that the fair market value of the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf ; or (ii) ?that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. (4) Where the Valuation Officer is of opinion that the value of the asset is higher than the value declared in the return made by the assessee under section 14, or 15, or where the asset is not disclosed or the value of the asset is not declared in such return or where no such return has been made, the Valuation Officer shall serve a notice on the assessee intimating the value which he proposes to estimate and giving the assessee an opportunity to state, on a date to be specified in the notice, his objections either in person or in writing before the Valuation Officer and to produce or cause to be produced on that date such evidence as the assessee may rely in support of his objections. (5) On the date specified in the notice under subsection (4), or as soon thereafter as may be, after hearing such evidence as the assessee may produce and after considering such evidence as the Valuation Officer may require on any specified points and after taking into account all relevant material which he has gathered, Valuation Officer shall, by order in writing, estimate the value of the asset and send a copy of his order to the Wealth‑tax Officer and to the assessee ??.. A reading of section 16‑A, clauses (4) and (5) leaves no room for doubt that the 2nd respondent‑Valuation Officer‑while exercising the powers referred to above, exercises a quasi‑judicial function. He has to act judicially. He should act fairly and bona fide, as is the case, with all statutory function?aries. If so, he should take into account only relevant materials, and eschew from consideration irrelevant materials. It should be borne in mind that the'` Wealth‑tax Officer has no power to alter the value of the assets as estimated by the Valuation Officer The assessing authority is bound by the report of the Valuation Officer (section 16 (u) (6) of the Act). The only remedy of the aggrieved assessee is to file an appeal from the order of the Wealth‑tax Officer, wherein the report of the Valuation Officer can also be challenged. As stated, the Valuation Officer functions as a "quasi‑judicial authority" in exercise of the powers vested in him under section 16‑A (4) and (5) of the Wealth‑tax Act. The decision of the Allahabad High Court reported in Bireshwar Vookerji v. Inspecting Assistant Commissioner of Wealth‑tax (1) and of Delhi High Court in Werger & Co. v. D. V. O. (1978) 115 I T R 648 : 1979 Tax L R 367) are instructive in this regard. The duties enjoined on such quasi‑judicial authorities have been stated by the Supreme Court in the decision Kraipak v. Union of India (AIR 1970SC150) and there is no need to repeat what has been stated in the said decision. Suffice it to say, that even a statutory authority, should exercise his powers in accordance with law. He should act fairly, bona fide, honestly and with) due care and caution, since the exercise of power by such authorities affect persons with civil consequences. Can it be said that the 2nd respondent when) he passed Exh. R. 2(A) and (B) did so, bearing in mind the above norms? From the facts stated above, it is clear that the 2nd respondent acted arbitrarily and not "fairly" and also did not conform to the principles of natural justice in passing Exhs. R. 2 (A) and R. 2 (B). The facts also disclose that the 2nd respondent acted casually, mechanically and without a proper application of the mind. In passing Exhs. R. 2 (A) and R. 2 (B), in the way, he did, the 2nd respondent has totally failed to observe the normal and minimal norms, which should have been adhered to, in the exercise of quasi ?judicial functions. The portions quoted from his final Report Exhs. R. 2 (A) and R. 2(B), referred to as Paras. 8.3.3., 8.1.4: and 8.3.5. demonstrate that the 2nd respondent has failed to act in accordance with law.

6. Counsel for the Revenue conceded that the above aspects adverted to above were never put to the assessee (petitioner). It is so evident from Exhs. R 2 (A) and (B) and also the counter affidavit filed by the 2nd respondent himself: The decision Ponkunnam Traders v. Additional Income?-tax Officer (1972) 83 I T R 508 (Ker.) : (1976) 102I T R 366 (Kar.), is instructive in this context. In that case the material relied on by the officer was the assessment of the assessee for the previous year. It was held that even though the relevant material relied on by the Income‑tax Officer was the assessment of the assessee (himself) for the previous year, it? should be put to the assessee. Failure to do so, was held to be a violation of principles of natural justice. The following extracts from the decision reported in Ponkunnam Traders case (supra) are apposite and may be usefully referred to, in construing section 16‑A (4) and (5) of Wealth‑tax Act :‑ "The contention of the assessee is that he was entitled to notice under section 142(3) of the Act as to materials gathered by the Income‑tax Officer and to have his say about them, and as no such notice was given or his explanation heard, the order of assessment is void to the extent objected to by him. Section 142 reads : "(1982) 135 I T R 29) For the purpose of making an assessment under this Act the Income‑tax Officer may serve on any person who has made a return under section 139 or upon whom a notice has been served under sub?section (2) of section 139 (whether a return has been made or not) a notice requiring him, on a date to be therein specified,‑ (i) to produce, or cause to be produced, such accounts or documents as the Income‑tax Officer may require, or ?(ii) to furnish in writing and verified in the prescribed manner informa?tion in such form and on such points or masters (including a statement of all assets and liabilities of the assessee, whether included in the accounts or not) as the Income‑tax Officer may require : ...... (2) For the purpose of obtaining full information in respect of the income or loss of any person, the Income‑tax Officer may make such enquiry as he considers necessary. (3) The assessee shall, except where the assessment is made under section 144, be given an opportunity of being heard in respect of any material gathered on the basis of any enquiry under subsection (2) and proposed to be utilised for the purpose of the assessment." Counsel for the revenue contended that it was only in respect of the materials gathered by the Income‑tax Officer as a result of his enquiry under subsection (2) of section 142 that he was bound to give the assessee an opportunity of being heard, that the knowledge of the Income‑tax Officer of the previous return submitted by .the assessee was sufficient material for a best judgment assessment and such knowledge cannot by any stretch of imagination be regarded as materials gathered on the basis of enquiry within the meaning of section 142(3), and, so, no opportunity of being heard in respect of that material was required. I think that when an Income‑tax Officer gathers material from a source other than the records relevant to the year of assessment, he has gathered materials on the basis of enquiry within the meaning of section 142(3), and, therefore, he wilt be bound to give an opportunity to the assessee in respect of the materials so gathered. In this case the assessee may have a thousand explanations to offer as to why he could not make the same profit in the year in question as in the previous year." And at page 512, Mathew, J. as he then was, held :‑‑ "Although the Income‑tax Officer was entitled to use his knowledge of the previous return by the assessee, that must have been put to the assessee and his explanation asked for." I should state, that the above salutary principles laid down by this Court were totally ignored by the 2nd respondent. The 2nd respondent has not acted fairly either. I am not expressing any opinion about the averments regard?ing the baste with which the 2nd respondent passed Exhs. R. 2(A) and (B) detailed in paragraph 4 of the reply affidavit dated 27‑6‑1983 and paragraph 2 of the petition, C., M. P. No. 16023 of 1983. In the light of the above, I hold that Exhs. R. 2 (A) and (B) final valuation reports of the 2nd respondent, cannot stand. 'They were passed to violation of the principles of natural justice and so were void and infirm. I declare that Exhs. R. 2 (A) and (B) are null and void. They are quashed. The other points raised by the petitioner are left open:

7. The 2nd respondent is at liberty to make a fresh final valuation report "de novo" in accordance with law and after affording the petitioner a reasonable opportunity to put forward his objections. The 2nd respondent will supply all the materials on which he proposes to rely, to the petitioner within three weeks from the date of receipt of this judgment. Apart from the objections now filed, the petitioner can file additional objections, if any, and also tender all the materials on which he proposes to rely to substantiate his contentions within three weeks from the date of receipt of the communication from the 2nd respondent. In view of the complicated questions involved for adjudication, the petitioner, if he so desires, may also be heard. The final valuation report itself will be completed, as far as possible, within two months from the date of receipt of this judgment.

8. The O. P. is disposed of as above. There will be no order as to costs. M. B. A.????????????????????????????????????????????????????????????????????? Reference answered accordingly.