ORDER
Per Shri S. L. Banerjee, J. M. – This bunch of eight appeals is directed against the consolidated order of the learned Dy. Commissioner of Wealth-tax (Appeals) [in short DCWT (A)] dated 14-6-1989. The impugned assessments can be classified into two grounds. The first five appeals relating to the asst. years 1980-81 to 1984-85 relate to the assessment orders u/s 16(3) /17 of the Wealth-tax Act, 1957 (the Act for short) and other three appeals relating to the asst. years 1985-86 to 1987-88 relate to the assessments framed u/s 161(3) of the Act. Barratry of these appeals relates to the controversy of valuation of jewelries, more preciously, the diamond jewelries. The assessee got these jewelries valued by one Sri Gopi Nath Mahendra of Kanpur, stated to be an approved valuer, on 31-3-1976. The Wealth tax Officer (for short WTO) estimated the value as per valuation report of the Govt. valuer dated 6-12-1986. This valuation was obtained at the time of search at the assessees premises.
2. The first group of appeal : For the asst. years 1980-81 to 1984-85, the assessee declared the value of these jewelries, in her return, on estimate basis. The learned counsel for the assessee, Sri A. K. Rastogi, clarifies that the valuation adopted in these returns are by adding certain percentages with the estimate made by the approved valuer as on 31-3-1976. The value declared for the asst. years 1980-81, 1981-82, 1982-83, 1983-84 & 1984-85 were Rs. 40,777, Rs. 40,777, Rs. 40,777, Rs. 73,440 and Rs. 61,200 respectively. The WTO in the original assessments had estimated the value at Rs. 51,000 Rs. 61,200 and Rs. 61,200 for the asst. years 1980-81, 1981-82 and 1982-83 and accepted the value declared by the assessee for the asst. years 1983-84 & 1984-85 at Rs. 61,200 respectively. In the reassessments, he has estimated the value for all the relevant asst. years at Rs. 1,95,650.
A search was conducted in the premises of the appellant on 26-9-1986. These jewelries were valued by the Govt. valuer at Rs. 1,95,650 as per his valuation report dated 6-12-1986.
The WTO issued notices u/s 17 of the Act. According to him, the assessee had failed to disclose fully and truly all material facts relating to the assessments. The assessees representatives were asked to explain the differences of value declared in the return and the value determined by the Govt. valuer. They advocated that proceedings u/s 17 of the Act was on account of mere change of opinion. They relied several decisions before the WTO (decisions cited by them, however, not recorded in the order). The WTO did not accept the plea of the representatives. He relied on two decisions in support of his section. The first decision in Ganeshi Lal & Sons v. ITO [1980] 4 Taxman 400 (All.) in which the Court has held that (WTO wrote) any document seized during the search operations showing under valuation of asset can form a good information for taking action u/s 17. Since, the valuation was done in the presence of the assessee and the witnesses by a registered valuer in the course of search operation, the information regarding under valuation of jewellery can be considered as document found in the course of search and seizure operation.
For the contention of change of opinion, the WTO relied on CIT v. A. Raman & Co. [1968] 67 ITR 11(SC) to justify his action u/s 17 of the Act. He adverted that in that case information from internal sources concerning facts or law relating to a matter bearing on the assessment can be utilised for the reassessment purpose. He pointed out that in that case, it was observed that the Taxing Officer should be learnt something or know something which he did not know previously. If there is information leading to the belief that there was escapement of tax the mere fact that the information resulted in a change of opinion will not make the section inapplicable.
The learned counsel of the assessee before the DCWT (A) relied on the decision of the Honble Rajasthan High Court in the case of Saroj Devi v. WTO [1984] 148 ITR 452 wherein it was held that the WTO must have reason to believe that under the assessment was by reason or omission or failure on the part of the assessee to disclose fully & truly all material facts necessary for the assts. and as the appellant had disclosed all the items of jewelries and the ornaments and had also given their valuation on the basis of approved valuers report, there was no concealment of any primary fact.
3. In the opinion of the DCWT (A), as the appellant had failed to disclose fully & truly all the correct value of the jewellery, proceedings u/s 17 were proper and the decisions relied by the learned counsel are well placed. The learned DCWT (A) distinguished the decision of the Honble Rajasthan High Court relied by the learned counsel adverting the fact that in that case reopening was made after the audit objections were raised. Whereas in the instant case proceedings for reopening were not initiated on the basis of audit objection.
4. The learned counsel for the assessee, Sri A. K. Rastogi, appeared on behalf of the assessee before us. He submitted that there were full disclosure of primary facts before the WTO at the time of original assessment, therefore, proceedings u/s 17 have been wrongly initiated. He pointed out that weight and descriptions of the jewelries were made available to the WTO at the time of making original assessments. In three of the asst. years, i. e., in the asst. years 1980-81, 1981-82 & 1982-83 the WTO estimated the value which in his opinion the jewellery could fetch if sold in the open market on the valuation date. For the asst. years 1983-84 and 1984-85 he had accepted the value which was declared by the assessee herself in the return in the asst. orders u/s 16(3) of the Act which presupposes the fact that they were made after scrutiny. In the above circumstances, if the WTO reopened the assessments which are already completed invoking provisions u/s 17 it will be contrary to law as has been described in various Courts. He placed (the decision of Saroj Devi (supra) which was cited before the DCWT (A). In the opinion of the learned counsel, the distinction tried to be made by the DCWT (A) from the facts of this case and the case of the Honble Rajasthan High Court is irrelevant. The issue decided in that case is fully applicable in the case before us. He then relied on the decision of the Honble Patna High Court in Magni Ram Baidyanath v. CBDT [1985] 153 ITR 154 (SC) (sic) where it was held that when the assessee had furnished the profit & loss account, the balance sheet, the interest account and all material facts necessary for the purposes of assessment during the relevant assessment proceedings, the assessments cannot be re-opened u/s 147(1) (a) of the IT Act, 1962. Mere change of opinion with regard to the losses incurred will not empower an ITO to invoke proceedings u/s 147(a) of the I. T. Act. The next case relied by him was CWT v. Smt. Gulnar Marfatia [1986] 159 ITR 311 (Raj.) where it has been held, valuation report of a Valuation Officer u/s 16A of the Act cannot be formed a basis for reassessments u/s 17(1) (a) or (b) of the Act. In that case, the Honble Rajasthan High Court had repeated his view expressed in another case of the same Honble High Court in the case of Brig. B. Lall v. WTO [1981] 127 ITR 308 where it has been held that a completed assessment cannot be reopened by reference to the report of the Valuation Officer for the purposes of reopening as it is not a reason for belief within the meaning of clause (a) or (b) of section 17 (1) of the Act.
5. The learned D. R., Sri S. Mukherjee, supporting the reasons adopted by the learned lower authorities argued that the valuation report of the departmental valuer, at the time of search, is a definite information to enable the WTO to initiate reassessment proceedings. He averted the reasonings of the learned counsel that the assessee had made true and full disclosures of the material facts in this case. He vehemently argued that the assessee by not giving true value of the jewelries had concealed the true and full facts before the WTO. In reply to the submission of the learned counsel that the assessee had given full particulars of the jewelries which should be treated as full and true disclosures. He diatribe that it is a frail attempt of ablution. He argued that in case of valuation of property only true disclosure of the value can be treated as a full disclosure and in this case the assessee failed to do so.
6. In the asst. years 1985-86 to 1987-88, the assessee declared the value of the impugned jewelries at Rs. 61,200 in each of the asst. years. As these assessments were completed after search and receipt of the valuation report of the Valuation Officer, the WTO valued the jewelries as per valuation report at Rs. 1,95,650. These were reduced to Rs. 1,34,450 by the learned DCWT (A). The learned counsel submitted that the valuation made by the Valuation Officer is excessive and the learned DCWT (A) also sustained the estimate at a very high amount. He further contended that the valuation report of the Valuation Officer was on 5-12-1986 which should not have been applied in the relevant asst. years. In the opinion of the learned counsel, even if the rise in the prices in the jewelries is taken into consideration the value of the jewelries estimated in 1976 approximately Rs. 40,000 cannot be appreciated to the extent as sustained by the learned DCWT (A). The learned D. R. is of the opinion that the valuation adopted by the WTO was on the basis of an expert valuer and, therefore, that should be accepted. In any case, he submitted that the learned DCWT (A) had already considered all the submissions of the assessee. Therefore, no further relief is available to her.
7. We have considered the rival submissions, facts and material on record. To appreciate the real controversy, for convenience, we would quote section 17(1) of the Act which is as under :
“(1) If the Wealth-tax Officer –
(a) has reason to believe that by reason of the omission of failure on the part of any person to make a return under section 14 of his net wealth or the net wealth of any other person in respect of which he is assessable under this Act for any assessment year or to disclose fully and truly all material facts necessary for assessment of his wealth or the net wealth of such other person for that year, the net wealth chargeable to tax has escaped assessment for that year, whether by reason of under-assessment or assessment at too low a rate or otherwise; or
(b) has, in consequence of any information in his possession, reason to believe, notwithstanding that there has been no such omission or failure as is referred to in clause (a), that the net wealth chargeable to tax has escaped assessment for any year, whether by reason of under-assessment or assessment at too low a rate or otherwise : He may, in case, falling under clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that assessment serve on such person a notice containing all or any of the requirements which may be, included in a notice under sub-section (2) of section 14, and may proceed to assess or reassess such net wealth, and the provisions of this Act shall, so far as may be, apply as if the notice had issued under that sub-section.”
The above section deals with the assessments of wealth which has escaped or under-assessed. Sub-section (a) applies when the assessee has omitted or failed to file the return or has not disclosed fully & truly all material facts necessary for the assessment. Sub-section (b) applies even there is omission or failure of the assessee, the WTO has reasoned to believe in consequence of an information that the newt wealth has escaped assessment or underassessed. In respect of first clause, action should be initiated within 8 years of the relevant assessment year and for clause (b) within four years of the relevant assessment years.
There is no definition of material facts in the Act. But the nature of the same has been described in various cases which depends upon the facts of each case. According to the learned D. R. material which was not disclosed was the true value of the jewellery. In the case of Smt. Tarawati Devi Agarwal v. ITO [1986] 162 ITR 606, the Honble Calcutta High court had held, valuation is always a question of opinion and unless there was a clear finding on the bases of material that the assessee had invested in the construction more than what had been shown by her in the course of assessment proceedings, the ITO could not proceed merely on the basis of the valuation report of the departmental valuer. He has to reject the assessees valuation assigning reasons therefor. The reassessment notices issued in these cases were not valid and liable to be quashed. In the case of Saroj Devi (supra) the Honble Rajasthan High court had held that when the assessee had disclosed all items of jewelries and ornaments and had given valuation on the basis of approved valuers report, he had not concealed any primary fact and it was not the assessees fault if the WTO did not make proper enquiry about the valuation before he made the assessments. The Honble Madhya Pradesh High court in the case of Smt. Prabha Rajya Lakshmi v. WTO [1983] 144 ITR 180 had discussed the issue. The facts were like this : in the asst. year 1971-72 the assessee disclosed the value of her lands on the basis of an approved valuer and the same was accepted by the WTO. Though there was no valuation report, the assessee declared the same value in the asst. year 1972-73. It was accepted by the WTO. The assessee sold a part of her land thereafter at a value much higher than the value shown. The WTO, on the basis of this information or sale price, reopened the assessments for the asst. year 1972-73 u/s 17(1) (a) on the ground that the assessee did not disclose correct value of the lands. It was held by the Honble court that if the WTO had doubted the correctness of the valuation, it was open to the department to get the same valued by its own valuer or to have recorded material about the real market value of the lands on the valuation date.
It will be pertinent to note that correct valuation of the land on the valuation date was not considered to be a primary fact. The High court opined that if the correct valuation of the land on the valuation date had not been determined by the WTO on the basis of enquiry, he cannot reopen the assessment u/s 17(1) (a) blaming the assessee it had not disclosed the correct valuation.
In view of the above, we may say, germane of the contentions of the learned D. R. that unless an assessee discloses the discloses the correct value of a property, he may fetch proceedings u/s 17(1) (a) of the Act is not always a correct view. If there is any material to show that the assessee had knowledge of the correct value of any property on the valuation date and same had not been disclosed to the assessing officer at the time of original assessment proceedings, then proceedings u/s 17(1) (a) of the Act lies. For these purpose, we may refer the case of Rai Singh Deb Singh Bist v. Union of India [1970] 77 ITR 802 (Delhi), in that case, the Supreme Court held that material fact not known at the time of assessment cannot be used for reopening of assessment u/s 34(1) (a) of the I. I. T. Act, 1922 pari materia of section 17(1) (a) of the W. T. Act. The same view was taken by the Honble Calcutta High Court in the case of P. R. Mukherjee. Here, in this case, the department did not bring any the case of P. R. Mukherjee. Here, in this case, the department did not bring any material to show that the assessee had knowledge of correct value of the impugned jewelries in the relevant valuation dates. In our opinion, therefore, proceedings u/s 17(1) (a) does not lie.
8. It cannot be disputed that the departmental valuers report at the time of search is an information in respect of proper valuation of the jewellery. The case of Smt. Gulnar Marfatia (supra) cited by the learned counsel is not applicable in this case. The Honble High Court in that case followed its own decision in Brig. B. Lalls case (supra) where reference was made to the Valuation Officer for the purposes of the reopening of the assessments. The Honble High Court was of the view, section 16A of the Act does not permit it. This section can only be applied only when assessments are pending. Reference itself was challenged successfully. In the instant case before us the facts is different. It is not a report u/s 16A by reference of the Valuation Officer to enable him to reopen the assessment. It is at the time of search it was obtained to get the proper valuation and the basis of this valuation the WTO formed the belief, the net wealth was under-assessed in the original assessment proceedings. It cannot be denied, therefore, there was no nexus between information obtained from the valuation report and formation of necessary belief. Proceedings u/s 17(1) (b) is, therefore, validly taken provided, they are within the four years of the assessment years when the notice had been served.
9. In the notices issued in the relevant asst. years, it is stated by the learned counsel that there is no indication under which sub-clause the notices [17(1) (a) or (b) of the Act], have been issued. He argued, if the notices have been issued u/s 17(1) (a) then the assessments u/s 17(1) (b) will be improper and irregular. According to the learned D. R., on the contrary, notices are for under-assessments and the assessee was not misguided by the same. He had got the full opportunity to explain the matter before the WTO. He, therefore, submitted that even in the cases where section 17(1) (a) is not applicable, the cases fully under gamut of section 17(1) (b) of the Act.
10. In considering the contrary arguments, we come across the Full Bench of the Honble Calcutta High Court in the case of Smt. Nirmala Birla v. WTO [1976] 105 ITR 483 (FB), where it has been held that originally notice issued u/s 17 (1) (a) can be treated as notice u/s 17(1) (b) provided the same is issued within the period of limitation of four years. In view of the above matter, we have no hesitation to hold that where notices are issued within four years of the assessment years under appeal, proceedings are valid and should be confirmed on this issue.
We have also given our careful consideration in respect of valuation of the jewellery in the relevant asst. years. The impugned jewelries were valued at Rs. 36,000 on 31-3-1976 and after 10 years was valued at Rs. 1,95,650. The increase is, therefore, about Rs. 1,60,000. Following the straight line method, we compute the increase @ Rs. 16,000 per year. The WTO is directed to reduce the value of the jewelries by Rs. 16,000 in each of the asst. years from the date of valuation regressively.
11. In the result, the appeals are allowed protanto.