ORDER–Condition precedent.
Ratio:
The Commissioner can validly assume jurisdiction under section 25(2) only when he establishes that impugned order by the Wealth Tax Officer is not only `erroneous’ but also that the `error’ has operated against the interests of the revenue.
Facts:
The Wealth Tax Officer allowed deduction to the assessee, the ruler of the erstwhile Kota State under section 5(1)(iii) for assessment years 1970-71 to 1976-77 not only in respect of Umed Bhawan declared as his official residence but also the surrounding land measuring 2507 bighas on the basis of last assessment. The Commissioner set aside the Wealth Tax Officer’s order for assessment years 1966-67 to 1969-70 under section 25(2) which was upheld by the Tribunal. It subsequently, also set aside the Wealth Tax Officer’s orders under section 25(2) and directed him to include such lands in the net wealth of the assessee after giving him proper opportunity.
Held:
The Commissioner has correctly held that the Wealth Tax Officer did not apply his mind at all in making assessments as to whether the land surrounding the Umed Bhawan Place was exempt under section 5(1)(iii) nor did he make any inquiry in this behalf. Therefore, the jurisdiction by the Commissioner under section 25(2) was validly assumed.
Application:
Also to current assessment years.
Wealth Tax Act 1957 s.25(2)
ORDER
Anand Prakash, Accountant Member
1. The sole controversy in these appeals is, whether, on the facts and in the circumstances of the case, the Commissioner was justified in having set aside the orders of the WTO and in having directed the WTO to reframe them in accordance with the instructions given by him in the impugned orders.
2. As the background of all these cases is identical, they were all heard together and are being disposed of by a common order for the sake of convenience.
3. The assessee is the ex-Maharaja of the erstwhile State of Kota. The aforesaid State of Kota was merged in the United States of Rajasthan in 1948-49. With the formation of this, the question of private properties of the rulers of the merged States including the then ruler of Kota was taken up for consideration by the Government of India and the said question was settled in accordance with the provisions contained in paragraphs 156 to 161 of Chapter of the White Paper on the Indian States issued by the Central Government. In accordance with the contents of paragraph 158 of the said White Paper ‘Palaces and other residential buildings’ were earmarked and allocated as private properties of the rulers on the basis of the previous use of the said palaces, etc. and the needs of the ruler and of the Government. Umed Bhavan, Kota, was described as the private property of the Maharao of Kota in the inventory of the private properties allocated to the said Maharao. The relevant entry in the inventory reads as follows :
Umed Bhavan including gardens, rare, buildings, etc., comprising the entire compound.
The aforesaid inventory was signed by one Shri C. Gamesman, Deputy Secretary to the Government of India in the Ministry of States. Certain concessions with regard to the payment of income-tax were given to the rulers of the erstwhile States. One of the concessions given was not to tax the property income from such palaces to be designated by the Government of India, which were declared to be the official residences of the rulers. In pursuance of the powers vested in the Central Government, a notification was issued by the Government of India in accordance with Section 60A of the Indian Income-tax Act, 1922 (‘the 1922 Act’) on 22-12-1950. The said notification appears at page 16 of the assessor’s first paper book and reads as follows :
In pursuance of the provisions of item (iii) of paragraph 15 of the Part B States (Taxation Concessions) Order, 1950, the Central Government hereby declares, for the purpose of paragraph 15 of the said order, the Palaces specified in column 2 of the table annexed hereto as the official residences of rulers of the former Indian States (now included in Part B States specified in the corresponding entry of column 3 of the said Table).
TABLE
_____________________________________________________
SI. Description of Rulers of the former
No. the palace Indian States now
included in Part
B States)
_____________________________________________________
1 2 3
_____________________________________________________
21. Part 'B' State Rajasthan Ruler of Kota"
1. Umed Bhavan,
2. City Palace
4. The Wealth-tax Act, 1957 (‘the Act’) came into operation with effect from 1-4-1957. The question of exemption with regard to palaces, corresponding to the concession given to the rulers under the Income-tax Act, 1961, referred to above, came up for consideration before the Government of India. On 20-1-1958, Mr. V. Vishwanathan of the Ministry of Home Affairs, Government of India, wrote to the Maharaja of Kota with regard to the exemption from wealth-tax to be given to one of the palaces of the ruler as follows :
As your Highness may be aware Section 5(1)(iii) of the Wealth-tax Act exempts from the wealth-tax anyone building in the occupation of a ruler declared by the Central Government as his official residence under paragraph 13 of the Merged States (Taxation Concessions) Order, 1959, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950. The notifications regarding official residences which have been issued by the Central Government for the purposes of income-tax will, therefore, apply for the purposes of the wealth-tax also and no fresh or further declaration by the Central Government is necessary. In cases where more than one building has been declared by the Central Government as the official residence of a ruler the rulers concerned have to select the particular building in respect of which they would like exemption under Section 5(1)(iii) of the Wealth-tax Act.
We notice that the Central Government have declared more than one palace as your Highness’s official residence. Since the exemption from the wealth-tax is available for only one such building, we shall be grateful if your Highness will please let us know which palace you would like to select for this purpose.
The aforesaid letter of Shri Vishwanathan was replied to by Maharao Bhim Singh on 23-1-1958, wherein the Maharao wrote as follows :
With reference to your D.O.F. No. 23/16/57 Poll III dated the 10th instt. I write to request you kindly to move the Government to exempt Umed Bhavan under Section 5(1)(iii) of the Wealth-tax Act.
Since then ‘Umed Bhavan’ is being allowed exemption of Section 5(1)(iii) of the Act.
5. When the assessment for the assessment year 1957-58, which was the first assessment under the Act, was taken up by the WTO, he raised the question of the exemption of the said palace under Section 5(1)(iii) and the extent of its operation with regard to the said palace under the assessee’s submission to the WTO vide his letter dated 2-1-1969, was, inter alia, as follows :
According to Section 5(1)(iii) of the Wealth-tax Act, 1957 (any one palace which is in the occupation of a ruler declared by the Central Government as his official residence is exempt from paying wealth-tax. The Umed Bhavan in which the assessee-residence has been declared as his official residence (sic). The copy of letter received from the Government of India, Ministry of Home Affairs, dated 19th January, 1950 and reply sent by the assessee are enclosed herewith for your kind perusal which are self-explanatory.
A certificate giving full description in respect of the entire compound, which forms the part of the Umed Bhavan Palace, declared by the Ministry of Staets as personal and official residence of ruler is enclosed herewith for your kind verification.
The total area of Umed Bhavan Palace comprising entire compound is about 880 acres. The compound is meant for keeping various types of forest animal, cows, farming and small fruit gardens.
6. It appears that the WTO made his private enquiries also from the Tahsildar, Kota, vide his letter dated 8-1-1969 with regard to the area, etc., of the palace. He wrote, inter alia, the following to the Tahsildar :
H.H. Maharaja Bhim Singhji is being assessed to wealth-tax by me. For this purpose, I require the following information :
The size of the land in terms of acres/sq.yds./sq.ft. owned by the assessee. You may be aware that there is a vast open land situated in the residential area surrounding the Umed Bhavan Palace which is enclosed by iron bars all around. The land extend from railway colony on the one side and the military ground on the other.
The Tahsildar replied to the queries of the WTO vide his letter dated 23-1-1969 wherein he gave, inter alia, the following information to the WTO:
That Umed Bhavan Palace was part of the Nagar Parishad, that the area of the land comprising the said Bhavan was 2732 bighas that of the above land 892 bighas was covered by groves and that no land revenue was payable with reference to the said land.
7. On receipt of the above information from the Tahsildar the WTO addressed a letter to the assessee on 1-2-1969, wherein he wrote to him, inter alia, as follows :
Revenue authorities of the State Government have given me to understand that the area of the compound surrounding the Umed Bhavan Palace is 2732 bighas and out of this, about 892 bighas is used for agriculture and fruit garden. The rest of the land, i.e., two-third part of the total area is either lying barren or used for keeping various types of forest animals. This fact has also been admitted in your letter….
Under the definition of ‘assets’ in Wealth-tax Act, 1957, assets includes ‘property of every description, movable or immovable but does not include agricultural land’. According to this definition only the agricultural land is not liable to wealth-tax. The barren land or the land which is used for any other purpose such as. for forest animals is not exempt from wealth-tax….
The WTO then drew the assessee’s attention to the decision of the Hon’ble Gujarat High Court in the case of Rasiklal Chimanlal Nagri v. CWT [1965] 56 ITR 608 and pointed out as follows :
Your vast land surrounding the palace satisfies conditions laid down in Nagri’s case. The exemption granted to you under Section 5(1)(iii) relates only to the palace and the land appurtenant thereto. There is no other ruler in Rajasthan who has claimed exemption for such a vast non-agricultural land of over 800 acres situated within the municipal limit or in the residential area as in your case. Hence, in your case, I intend to treat a part of the said 800 acres as non-agricultural urban land liable to wealth-tax. The area works out as under :
Area of the total land
(as shown in your letter) 880 acres
Less : Considered necessary
for garden lawn,
etc., for personal
residence as a ruler 8O acres
---------
800 acres
Less : one-tenth of total land
for possible development
cutting out residential
plots, etc. 80 acres
_________
Balance non-agricultural land : 720 acres
_________
Changed into sq. yds. and sq.
ft. 34,84,800 sq. yds.
or 3,63,62,200 sq. ft.
The present market value of non-agricultural land in the area is about Rs. 2 to Rs. 3 per sq. ft. It is, however, true that there has been an appreciation in the valuation and prices during the period from 1956 to 1969. But in any case, the price in 1956 cannot be less than 75 paise per sq. ft.
Taking the valuation at that rate for 3,63,62,200 sq. ft., the value of non-agricultural land in your case comes to Rs. 2,35,22,400 which will be added to your net wealth for the assessment year 1957-58.
Although an opportunity has been given by me to your representative on 27th December, 1968, I am giving one more opportunity to show cause why the valuation may not be taken as under.
8. The aforesaid letter of the WTO was replied to by the assessee vide his letter dated 17-3-1969 wherein the assessee made, inter alia, the following submissions :
That in the inventory of private property of His Highness the Maharaja Sahib Bahadur of Kota as approved by the Ministry of State Umed Bhavan Palace including gardens, rari (forest land), etc., comprising the entire compound was taken as one of the residential palaces of His Highness and the entire compound known as Umed Bhavan Palace or Umed Bhavan was deemed as one property and one palace of His Highness which was declared as one of the buildings of His Highness.
That as the rulers of the various States were not subject to any tax in the States over which they ruled, a guarantee was given by the Government of India as contained in paragraph 240 of the White Paper and Article 362 of the Constitution by which the personal rights, privileges and dignities of the rulers were maintained.
That in pursuance of this guarantee, the Central Government in exercise of the powers under Section 60A of the Indian Income-tax Act, 1922, was pleased to promulgate the Part B States (Taxation Concessions) Order, 1950, under notification No. S.R.O. 998, dated 22nd December, 1950. Under Clause 15 of the said order, the bona fide annual value of the palaces of rulers of Indian States which are declared by the Central Government as official residences of such rulers was exempted from payment of income-tax and super tax and also from such income being included in total income or total world income of rulers receiving them.
That in pursuance of these provisions of the Part B States (Taxation Concessions) Order, 1950, the Central Government issued notification dated 14th May, 1954, under which it declared Umed Bhavan and the City Palace as the two palaces of His Highness Kota, as his official residence and their income being excluded from taxation under the Income-tax Act. The entire Umed Bhavan was taken as one unit and it comprised of description as contained in the inventory, i.e., including garden, rari, buildings, comprising the entire compound.
That uptill 1954 there was no wealth-tax levied or realised in any part of India and that the Wealth-tax Act came into force on 1st April, 1957.
That in consonance with the undertaking given by the Government of India for preservation of rights and privileges of the rulers as referred in paragraph 240 of the White Paper on the Indian States and as recognised in Article 362 of the Constitution and the Part B States (Taxation Concessions) Order, 1950,Section 5 Clause 3 of the wealth-tax exempted one building in the occupation of a ruler declared by the Central Government as official residence under paragraph 15 of the Part B States (Taxation Concessions) Order, 1950. Thus, while under the Income-tax Act both the palaces, i.e., City Palace and the Umed Bhavan Palace of His Highness, Kota, are exempt from taxation, under the Wealth-tax Act only one of the two palaces of His Highness, Kota, is exempt from the payment of wealth-tax. His Highness has exercised his option for Umed Bhavan Palace for this exemption.
That, thus, under the law every palace is to be taken as one unit and it could not be divided or partitioned in two or more units for the purposes of payment of income-tax or wealth-tax or not exempt at all. It is submitted that no demarcation line can be drawn for treating only one portion of the palaces as the official residence and the other portion of the palace as subject to wealth-tax. The underlying policy of all legislation is that every palace is a unit by itself. It is no where laid down that a part of the palace will be exempted from the payment of wealth-tax. Attention of the department is drawn towards Section (4) of Section 5 of the Wealth-tax Act under which one house or part of a house belonging to an assessee is exempted from payment, of wealth-tax. It is further to be noted that the maximum value of a house or a part of a house used for residential purposes of a man should not exceed Rs. 1 lakh. Thus, while for a ruler one entire palace with unlimited valuation is exempt from payment of wealth-tax for a common man, only one building or a part of a building having valuation of not more than Rs. 1 lakh is so exempted. In one case the unit of a palace cannot be split up irrespective of size or valuation and in other cases a house can be split up and its valuation should not be more than the prescribed valuation.
That in view of the above provisions of law it is submitted that entire Umed Bhavan Palace comprised in one compound is one palace and is treated as such in the inventory and in the notification of the Central Government dated 14th May, 1954.
The assessee thereafter gave instances of as many as eight palaces of the erstwhile rulers wherein lands up to 400 acres were covered by the palaces and the compounds attached therewith and were, according to the assessee, exempted in terms of Section 5(1)(iii). The assessee also drew attention of the WTO to the observations of A.C. Sampath Iyengar in his commentary, The Three New Taxes, vol. 1, 5th edn., wherein the said learned author had observed as follows :
… The significance is that, unlike a building, a palace would consist of several buildings, though in a cluster, consisting of main buildings and out-buildings and stables and livery quarters, offices and treasuries and the host of paraphernalia and retinue lodged in the precincts of the palace.(p. 357)
9. It appears that on 17-3-1969 there was also discussion in between the WTO and the assessee’s counsel and the note-sheet of that date in the miscellaneous file of the WTO for the assessment year 1957-58 reads as follows :
Shri C.L. Agarwal, advocate attended with Shri B.D. Gargieya, C.A., from Ajmer. Their written reply is placed on record and the case is discussed. A map of the Umed Bhavan Palace, extracts from White Paper on Indian States Taxation Concessions Order and commentarysh own are gone through. They are heard for study and order.
Thereafter on 21-3-1979, the WTO passed the assessment order for the assessment year 1957-58, wherein accepting the above submissions of the assessee, no addition on account of lands attached with ‘Umed Bhavan Palace’ was made. The assessments for the assessment years 1958-59 onwards were made by the WTO as follows :
Assessment year Date of assessment
1958-59 24-3-1969
1959-60 26-3-1969
1960-61 19-4-1969
1961-62 19-4-1969
1962-63 30-3-1970
1963-64 30-3-1970
1964-65 10-3-1971
10. In all these assessments, the WTO exempted Umed Bhavan Palace and its compound in terms of Section 5(1)(iii). The observations of the WTO in respect of different assessment years are tabulated as follows :
_________________________________________________________________
Assessment Observations Remarks
year
_________________________________________________________________
1 2 3
__________________________________________________________________
1958-59 Umed Bhavan Palace and com- Page 33 of the assessee's
pound is exempt under Sub- paper book
Section 5(1)(iii)
1959-60 -do- Page 39 of the assessee's
paper book
1960-61 Umed Bhavan Palace and com- Page 44 of the assessee's
pound is exempt under section paper book
5(1)(iii) and Brijraj Bhawan,
Kota has already been gifted
to Maharajkumar Brijraj Singh,
son of the assessee. Hence,
they are not included
1961-62 -do- Page 50 of the assessee's
paper book
1962-63 -do- Page 54 of the assessee's
paper book
1963-64 -do- Page 60 of the assessee's
paper book
1964-65 In respect of exemption
under Section 5(1)(iv),
in my view, this
exemption is not
available to
the assessee, as the
exemption is provided
in respect of a house
belonging to and exclu-
sively used by him for
residential purpose. In
fact the assessee is
a ruler and has already
got exemption under
Section 5(1)(iii)
of the Wealth-tax Act,
1957, in respect of a
building occupied by
him. He is residing in
this building and as
such he cannot
avail of the concession
provided under Section
5(1)(iv).
11. It appears that reference of the above exemption underSection 5(1)(iii) to Umed Bhavan and the land attached with it and forming its compound was not made in the assessment orders for the assessment years 1965-66 to 1969-70 and, in fact, in returns for the assessment years 1966-67 to 1969-70, the assessee did not declare the said land even in his returns of wealth.
12. With effect from 1-4-1970, there was amendment to the definition of the word ‘assets’ as used in the Act and agricultural lands were made subject to wealth-tax. In his wealth-tax return for the assessment year 1970-71, therefore, the Maharaja filed details of agricultural lands owned by him vide Annexure ‘A’ to his return declaring therein that he owned 1345 bighas of agricultural lands in different villages listed in the said Annexure, the value of which was Rs. 56,348. The Accountant General, Rajasthan’s Audit Party, undertook audit of the various cases for verifying the correctness of the assessments done in view of the new provisions of the Act bringing to tax agricultural lands and on 5-3-1976 an audit note was sent by the Accountant General, Rajasthan, to the WTO, assessing the assessee, bringing to his notice, inter alia, the following facts with regard to the assessee :
As per land revenue records, Ladpura Tehsil, the assessee had 4,815 bighas valued at Rs. 47,42,550 (estimated by ACM, Kota). The wealth-tax assessments of the assessee were stated to be pending from assessment year 1965-66. It was noticed from the wealth-tax return that the assessee had shown 1342 bighas valued only for Rs. 56,348. Since the assessment is not finalised as yet, the commission as well as understatement of the valuation need to be got examined before completing the assessments.
Value of land as on 1-4-1970 Rs. 47,42,550.
13. On receipt of the aforesaid information, the WTO again raised with the assessee the question of assessability to wealth-tax of lands attached with Umed Bhavan and forming part of its compound. The assessee vide his letter dated 27-9-1977 submitted, inter alia, as follows :
As regards the point raised by your goodself that whether land comprising in the Umed Bhavan is agricultural land or urban land or abadi land. In this connection, we submit that entire Umed Bhavan including rari and compound is a personal property of the Maharao Saheb and is exempt from the purview of wealth-tax underSection 5(1)(iii) of the Wealth-tax Act, 1957. This point has already been clarified in the assessment relevant to assessment year 1957-58.
The land of Umed Bhavan compound is abadi land and not agricultural land. In this connection we draw your kind attention towards the letter of Assistant Secretary, Government of Rajasthan No. FLG/17/Rev./ A/65, dated 17-9-1966 in which they have clarified that the said land is not agricultural land but abadi land, the copy of which is enclosed herewith.
Therefore, the entire land comprising in Umed Bhavan is exempt under Section 5(1)(iii) of the Wealth-tax Act, 1957 and the same point has already been finalised in assessment year 1957-58.
14. The letter of the Additional Chief Secretary to the Collector of Kota, dated 17-9-1966, referred to above, by the assessee, has been placed by the assessee at pages 21 and 22 of his first paper book. Its relevant part may be extracted as below :
Sub : Personal property of His Highness the Maharaja of Kota.
Ref: Your letter No. Rev./KS/65-3739 dated the 10th June, 1965.
Sir.
I am directed to say that having regard to the definition of words ‘estate’ and ‘land’ as given in the Rajasthan Land Reforms and Acquisition of Land Owners Estate Act, 1963, ‘Umed Bhavan’ including gardens, rari, building, etc., comprising the entire compound entered in the inventory of the private property of His Highness, Kota, mentioned in the covenant, cannot be regarded as estate for the purposes of the aforesaid Act. Such property cannot, therefore, be acquired…. The land revenue was, therefore, incorrectly assessed on the land falling within the compound of Umed Bhavan, Kota…. The revenue record may, however, be corrected so that the correct nature of the land may be shown therein. You may now take necessary action in respect of correction of the record.
15. After receipt of the aforesaid reply of the assessee, dated 27-9-1977, the WTO wrote a letter to the assessee on 24-10-1977, the relevant part of which runs as follows :
Sub : Agricultural land – Details furnishing of assessment year 1970-71 and onwards.
From the perusal of wealth-tax assessment records and Tehsil records, I found that you have shown 1342 bighas as on 31-3-1970 whereas in Tehsil records it is 5031 1/2 bighas. You are kindly requested to explain the position and send reply on or before 26-10-1977 positively…. You have valued the agricultural lands at Rs. 56,348 for the assessment year 1970-71, Rs. 1,69,201 for the assessment year 1971-72 and Rs. 1,30,039 for the assessment year 1972-73. For the assessment year 1970-71, I may point out that you have sold agricultural lands in the month of December 1969 and if average rate of sale is taken as the basis of valuation, the value will be very high. You are, therefore, requested to please explain the position of agricultural lands owned by you and its valuation.
16. The assessee submitted his detailed reply to the aforesaid letter of the WTO vide his letter dated 29-11-1977, wherein the assessee explained, inter alia, as follows :
Your goodself has observed that why the agricultural land of Kheri Purohit 594 bighas, Dostpura 559 bighas and Khand Caunri 1050 bighas was not shown in the return. In this connection, we would like to draw your kind attention to our letter, dated 27-9-1977 in which we have submitted that these are not agricultural lands. These lands comprise Umed Bhavan which is the official residence of ex-ruler of Indian State, Kota. In this connection, as desired by your goodself we have filed the order of Government of Rajasthan No. FLG/17/Rev./A/65 dated 17-9-1966 according to which the aforesaid lands are nota gricultural lands and are comprising in Umed Bhavan which is the personal property of Maharao Shri Bhim Singhji Sahib of Kota-the original order is ready for your kind perusal and verification.
The entire Umed Bhavan is declared as official residence of ex-ruler which is exempt underSection 5(1)(iii) of the Wealth-tax Act, 1957 and this point has been discussed at length in the past and since then exemption is being allowed.
Therefore, we hope your goodself would now be quite satisfied on this point….
As regards Ladpura land out of 310 bighas, 304 bighas is comprising in Umed Bhavan compound and is not agricultural land.
Umed Bhavan is official residence of ex-ruler of Kota and, hence, it is exempt underSection 5(1)(iii) and as discussed at length as above.
17. Regarding the other lands, the assessee explained that they had either been sold away or they belonged to some other members of the assessee’s family.
18. After receiving the aforesaid reply of the assessee, the WTO reported to the IAC, vide his letter dated 3-1-1978, that there was no discrepancy in the figure of agricultural lands, as had been pointed out by the note of the Accountant General’s Audit party. The relevant part of the report of the WTO to the said IAC, may be extracted here for ready reference :
The case of H.H. Bhim Singh of Kota was examined. Assessee had shown agricultural land measuring 1345.12 bighas whereas in the Tehsil records, it has been shown at 5017 1/2 bighas. As per audit report the land has been shown at 4815.02 bighas. The consolidated chart with reasons is enclosed herewith. Assessee has given reasons for showing lesser agricultural land than recorded in Tehsil records. Some of the reasons are : either certain lands have been sold or belong to other family members of the assessee.
Tehsil records show the agricultural land at 5017 bighas out of which 3674 bighas have either been sold or given in Bhoodan or belonging to M.K. Brijraj Singh, Princess Indra Devi, Princess Bhuaneshwari Devi. The main chunk of lands measuring 2203 bighas is comprised in the official palace of His Highness, i.e. City Palace. They include the lands situated in Kheri Purohit, Dostpura, Khand Caunri villages which are now nowhere. It was on this land, the palace was built and the villages were removed. In this regard I may also submit that in Rampura village the assessee had shown 500 bighas whereas in Tehsil records it has been shown at 530 bighas. The balance would be 1343 which reconciles with the figures shown by the assessee. Details are given in Annexure ‘B’.
** ** ** Thus, in my opinion, there is no difference of land shown by the assessee. [Reference to City Palace above is wrong ; it should be to Umed Bhavan as is clear from the Annexures to this report.]
19. After taking into account the above submissions of the assessee, the WTO completed the assessment for the assessment year 1970-71 on 28-1-1978. Nothing on account of Umed Bhavan Palace and the lands attached therewith and forming part of its compound was added by the WTO.
20. Returns of wealth for the assessment years 1971-72 to 1976-77 were filed by the assessee claiming exemption with regard to Umed Bhavan in terms of Section 5(1)(iii) on the same basis as indicated above. The narrations in the various returns with regard to Umed Bhavan may be tabulated herebelow as follows :
Assessment year Narration Remarks
1971-72 Annexure forming Part Annexure 'K' of
IV of the wealth-tax the wealth-tax
return. List of return
assets which are not
taxable, hence,
excluded from the
wealth-tax return.
1972-73 Item No. 8 - Umed Annexure 'K' of
Bhavan, section the wealth-
5(1)(iii) of Wealth tax return.
-tax Act. Annexure
forming Part IV of
the wealth-tax
return. List of
assets which are not
taxable and claimed as
exempt, hence, excluded
from the wealth-
1973-74 tax return.
Item No. 7 - Umed
Bhavan - This
house is an official
residence of
ex-ruler, hence,
value exempt 30,00,000
under Section 5(1)
(iii) of the 24,50,530
Wealth-tax Act, _________
1957. 54,50,530
List of land sold _________
to co-operative 2,40,000
societies, Kota. _________
Land comprising in 52,10,530
Umed Bhavan compound _________
was sold to the
following co-
operative
societies :
(a) Shri Grah. Nirman
Samiti, Kota
(b) Shri Nath Grah
Nirman
Samiti, Kota
Less : Cash received this year
Notes : 1. The above lands comprising of Umed Bhavan compound were sold to above co-operative societies as per sale agreement dated 18-8-1972.
These sale deeds were presented for registration to Registrar of Kota on 18-8-1972 but the documents have not been realised so far and unless the registration deeds are returned to sellers, the deals are not final and, therefore, the amount is shown under protest. In any case, if final registration could not be effected, the land would remain exempt under Section 5(1)(iii) of the Wealth-tax Act, 1957, as in the past. If documents would be realised, the above value would be included in the return and the return would be amended accordingly. At present value is not included in the return and shown under ‘Protest’.
2. The accounts of the assessee are maintained on ‘cash basis’, hence, whenever the amount would receive the same would be included accordingly.
Annexure forming Annexure 'G2' of
Part IV of the the return.
return.
Item No. 9 - Umed
Bhavan, Kota - This
house including
compound is an
official residence
of ex-ruler, hence,
value is exempt under
Section 5(1)(iii) of
the Wealth-tax Act,
1957.
Annexure 'L' of
the return.
1974-75 -do- -do-
1975-76 -do- -do-
1976-77 -do- -do-
21. Assessments of the assessment years 1971-72 to 1974-75 were completed simultaneously with that of the assessment year 1970-71, i.e., on 28-1-1978. Assessments for the assessment years 1975-76 and 1976-77 were completed on 31-3-1978. No addition in respect of Umed Bhavan Palace and the adjacent lands comprised in the compound of the said Bhavan, was made in the aforesaid assessments. The WTO also made no mention in his assessment orders with regard to the aforesaid subject-matter and of the exchange of correspondence that he had with the assessee.
22.1 After the assessments, as above, had been completed, the WTO appears to have a query from the assessee regarding the mode of receipt of cash of Rs. 4,56,000 by way of advance against agreements to sell the lands, appurtenant to the palace, to the co-operative societies referred to above and as to how they were reflected in the assessee’s wealth. The assessee explained the position, vide his letter No. 7355/79 dated 26-5-1979, that the advances in question were received by cheques and that the same had been deposited in the assessee’s account in Bank of Rajasthan, Kota. Referring to the above letter and the explanation of the assessee, the WTO wrote to the assessee on 8-6-1979, inter alia, as follows :
Please refer to your authorised representative’s letter No. 1355/79 d ated 26-5-1979, mentioning therein that the amount of Rs. 4,56,000 received from co-operative societies as an advance money was deposited in the bank and the bank balances were increased. This reply is not sufficient. You are requested to please produce the bank pass book so that it may be ascertained that on what date and what amount was deposited in the bank. You are requested to produce the relevant documents so as to make sure that this amount of Rs. 4,56,000 has been included in the net wealth declared by you, within five days of the receipt of this letter.
22.2 On 12-6-1979, the assessee attended the office of the WTO and filed before him a letter stating, inter alia, as follows :
With reference to your above referred letter (i.e., 8-6-1979), we submit that advance money received by the assessee has been credited in the cash book of the assessee and also deposited with the bank.
The cash book as well as pass book is ready for your kind verification….
22.3 The occasion to make the aforesaid enquiry from the assessee is not clear, but what the record made available to us, however, makes clear is that on 25-6-1979 (i.e., within 13 days of the above proceeding), the WTO submitted proposals under Section 25(2) of the Act for the consideration of the Commissioner. The proposals were simultaneously put up for the years 1965-66 to 1973-74. Out of the above years presently under our consideration are the assessment years 1970-71 to 1973-74. As the proposals for all the years are in identical language, it would be enough if reference is made to one of such proposals for the assessment year 1970-71, which is in the following words :
The assessee owns a palace known as Umed Bhavan which was declared as official residence by the Government of India under paragraph 13 of the Merged States (Taxation Concessions) Order, 1950. In this list of palaces prescribed for rulers of Kota, Umed Bhavan is exempt as official residence.
The palace is surrounded by land measuring 2507 bighas, which has been claimed by the assessee as land appurtenant to Umed Bhavan and allowed exemption as such under Section 5(1)(iii).
The assessee’s claim of this vast area of land and land appurtenant to the palace cannot be accepted, in view of the general norms about land appurtenant to the building known as Umed Bhavan. Thus, the assessment made seems to be erroneous and prejudicial to the interests of the revenue.
It is, therefore, submitted that the assessment order for the assessment year 1970-71 may be cancelled under Section 25(2).
May it be noted that the WTO does not spell out in the above proposal his reasons to change his earlier conclusion, nor does he say that he had not examined the question of exemption earlier on the touchstone of ‘general norms about land appurtenant to the building’. In fact, this question was specifically raised by the WTO in his letter dated 1-2-1969 addressed to the assessee (para 7 supra) and was replied to by the assessee.
22.4 On receipt of the above proposals in the office of the Commissioner, the ITO (Judicial) undertook the scrutiny of the proposals and made a noting on the order sheet of the Commissioner’s file for the assessment year 1970-71 stating, inter alia, as follows :
I called the audit file from the Chief Auditor. There is nothing to indicate as to how the audit objection has been raised and actually what is the audit objection. What reports have been submitted to the Board. If approved, either the WTO may be called to discuss the case along with audit file or the Chief Auditor may be directed to discuss with me as to how he considered that the order by the WTO in the assessment years 1966-67, 1967-68, 1968-69, 1969-70 and 1970-71 are erroneous so far as prejudicial to the interests of revenue….
22.5 No action on the above noting, however, appears to have been taken. On 31-10-1979, the WTO appears to have sent another letter No. WTO/A/KTK/79-80 dated 31-10-1979 to the Commissioner, a copy of which was also endorsed by him to the Chief Auditor. This letter is not on the file of the Commissioner, produced before us, but reference to it is contained in the letter of the Chief Auditor being D.O. No. M.O. 88/ 7980/6025 dated 18-12-1979 found placed on the file of the Commissioner for the assessment year 1970-71. In the aforesaid letter, the WTO had brought to the notice of the Commissioner, the dates on which limitation for finalising proceedings under Section 25(2) in respect of different years was to expire.
22.6 On 14-11-1979, the WTO again submitted proposals under Section 25(2) to the Commissioner in respect of the assessment years 1970-71 to 1977-78. The proposals for the assessment years 1970-71 to 1973-74 were absolutely identical to those submitted earlier and the contents of which have been noted by us above. Proposals for the assessment years 1974-75, 1975-76 and 1976-77 were also identically worded. It is worth noting at this stage that the WTO did not allege in his proposals for the assessment years 1973-74 to 1976-77 that the assessee had not shown in his wealth, as declared in the returns, the sum of Rs. 2,40,000 for the assessment years 1973-74 to 1975-76 and of Rs. 4,56,000 for the assessment year 1976-77 received by him by way of advance from the co-operative societies for the proposed sale of land by the assessee to them.
22.7 In his forwarding letter to the above proposals, the WTO informed the Commissioner, inter alia, as follows :
In the above said case proposals under Section 25(2) were submitted… vide this office letter No. 435 dated 7-7-1979 for the assessment years 1965-66 to 1973-74. In this letter, I had submitted that the action taken by me under Section 17(1)(b) for the assessment years 1974-75 to 1977-78 may amount to a change of opinion and the same may not stand the test of appeal. I, therefore, submit that the assessment years 1974-75 to 1977-78 may also kindly be cancelled under Section 25(2) of the Wealth-tax Act, 1957, on the ground that the exemption of the land measuring 2507 bighas was wrongly allowed by the Wealth-tax Officer. The matter is still to be decided by CBDT, New Delhi, pending which the assessments may be cancelled… [The above letter is placed in the folder pertaining to proceedings under Section 25(2) of 1974-75].
22.8 On 4-12-1979, the ITO (Judicial) appears to have got activated once again and he called for the audit files pertaining to the assessee vide his D.O. Letter No. JC-2/Prop. Under Section 25(2)/79-80/4159 dated 4-12-1979 [copy of this letter is not on the file of the Commissioner, but the reply of the Chief Auditor to the above letter is on record of 1970-71 file under Section 25(2) of the Commissioner]. The Chief Auditor sent to the ITO (Judicial) four of his files under the cover of his letter D.O. No. 3785 dated 6-12-1979. The subject of the letter was described as follows :
Subject: Action under Section 25(2) of the Wealth-tax Act, 1957-Shri Bhim Singh, Kota-Audit objection-file-forwarding of-
After referring to the letter of the ITO (Judicial), the Chief Auditor wrote as follows :
2. As desired I am submitting herewith following records of Audit wing pertaining to Shri Bhim Singh of Kota :
File No. Subject
1. DP-149/WT/Vol. II C. and A.G. Report
1976-77-para 71-
Agricultural WT-
Kota District-
DP-1/49/WT.
2. DP-149/WT/Vol. VI Guard file-C. and
A.G. report 1976-77-
para 71-Agricultural
WT-DP-149/WT-
3. DP-149/WT/Vol. VII Correspondence with
Board and
Directorate.
4. DP-149/WT/Vol. XI Guard file-DP-149/WT
-C. and A.G's report-
para 71-Agricultural
WT- Correspondence
with Board. C. and
A.G's report 1976-77-
para 71-Agricultural
WT-Correspondence with
Board and Directorate.
22.9 On 18-12-1979, the Chief Auditor again wrote to the ITO (Judicial) inviting, his attention to the dates of limitation for action under Section 25(2) in respect of the various assessment years and requested him as follows :
You may kindly put up the matter to the learned Commissioner so that the action is concluded well in time. The connected records have already been sent to you on 6-12-1979.
23. It appears that the WTO had sent to the Commissioner the following records for his perusal vide his letter No. ITO/A/KTH/79-80/1064 dated 7-11-1979 :
1. Miscellaneous Cover for 1957-58.
2. WT 40 Cover 1957-58.
3. Miscellaneous Covers for the assessment years 1965-66 to 1973-74.
4. WT Covers for the assessment years 1973-74 to 1976-77.
He requested the Commissioner for the return of the above record vide his letter No. ITO/A/KTH/79-80/1147 dated 24-11-1979 [placed in Section 25(2) cover of the Commissioner for 1974-75]. The ITO (Judicial) returned the above record to the WTO, vide his letter D.O. No. JC-2/ Prop/25(2)/l8/79-80 dated 28-11-1979 [placed in the file of the Commissioner for the year 1974-75 in respect to Section 25(2) proceedings]. The assessment records of the assessee for the assessment years 1970-71, 1971-72, 1972-73, 1973-74 and 1965-66 (sic) and WT 40 were again called for from the WTO on 12-12-1979.
24.1 Thereafter, on 27-12-1979, the Commissioner issued show cause notices to the assessee in respect of the assessment years 1970-71 to 1974-75, the limitation for which was due to expire on 27-11-1980. The show cause notices for the assessment years 1975-76 and 1976-77, time limit for which was to expire on 29-3-1980, were issued on 4-3-1980.
24.2 In the show cause notice issued for the assessment year 1970-71, the Commissioner, after reciting that he had perused the records of proceedings and that therefrom he found that the assessee owned 2507 bighas of land in surrounding of Umed Bhavan at Kota and that the value of the aforesaid land had not been declared by the assessee in the wealth-tax return filed by him, proceeded to list the omissions and errors of the WTO on account of which, his order had become erroneous and prejudicial to the interests of the revenue as follows :
The assessment for the assessment year 1970-71 was made by the WTO on 28-1-1978. The value of aforesaid property could not be brought to charge because of failure on your part to declare the said asset in the return of wealth filed by you. In course of the assessment proceedings, you have filed letters dated 27-9-1977 and 29-11-1977 in which you have explained that the entire Umed Bhavan including rari and compound is a personal property and is exempted from the purview of wealth-tax under Section 5(1)(iii) of the Wealth-tax Act, 1957. The WTO has failed to discuss anything in this regard in the assessment order. The WTO has further failed to make enquiries whether the land in question is land appurtenant to the Umed Bhavan or not. Keeping in view the nature and measurement of land in no circumstances, it could be said that the entire land is appurtenant to the Umed Bhavan and is exempted under Section 5(1)(iii) of the Wealth-tax Act, 1957. The failure on the part of the WTO in not examining the assessment records and to bring to charge the said property to tax is considered by me to be erroneous and prejudicial to the interests of revenue.
On the facts and in the circumstances of the case discussed above, the Commissioner required the assessee to explain as to why action under Section 25(2) be not taken by him.
24.3 In respect of the assessment year 1971-72, the case for taking action under Section 25(2) was made out by the Commissioner in the show cause notice dated 27-12-1979 in the following words :
A perusal of records of proceedings was made. It is found that you owned 2507 bighas of land in surroundings of Umed Bhavan at Kota. The value of the aforesaid land was not declared in the wealth-tax return filed by you on 28-1-1972.
The assessment for the assessment year 1971-72 was made by the WTO on 28-1-1978. The value of the aforesaid property could not be brought to charge because of failure on your part to declare the said asset in the return of wealth filed by you. The WTO did not enquire about the aforesaid property and has also failed to bring to charge the said asset to wealth-tax. The failure on the part of the WTO in not examining the earlier assessment records and to bring to charge the said property to tax is considered by me to be erroneous and prejudicial to the interests of revenue.
24.4 The show-cause notice for the assessment year 1972-73 was in identical terms.
24.5 The show-cause notice for the assessment year 1973-74 was, however, slightly different and its relevant contents may be extracted at this stage as follows :
A perusal of records of proceedings was made. It is found that you owned 2507 bighas of land in the surroundings of Umed Bhavan at Kota. The value of aforesaid land was not declared in the wealth-tax return by you on 18-8-1973.
The assessment for the assessment year 1973-74 was made by the WTO on 28-1-1978. The value of aforesaid property could not be brought to charge because of failure on your part to declare the said asset in the return of wealth filed by you. You have, however, filed annexure G-2 along with the return. In the annexure, you have shown the details of land comprising in Umed Bhavan sold to the two co-operative societies. In a note annexed to the said annexure, it is mentioned that the land comprising of Umed Bhavan compound was sold to the co-operative societies as per sale agreement dated 18-8-1972. These sale deeds were presented for registration to the Registrar of Kota on 18-8-1972 but the documents have not been realised so far and unless the registration deeds are returned to sellers, the deals are not final and, therefore, the amount is shown under protest. In any case, if the final registration could not be effected, the land would remain exempt under Section 5(1)(iii) of the Wealth-tax Act as in the past. The WTO has neither included the cash receipt of Rs. 2,40,000 received by you towards sale proceeds in your net wealth nor has discussed in the assessment order about the exemption of the said land. It reveals from the assessment record that the WTO has failed to make enquiries and to consider the question of exemption of the land. The failure on the part of the WTO in not examining the assessment records and to bring to charge the said property to tax is considered by me to be erroneous and prejudicial to the interests of revenue.
24.6 The show-cause notices for the assessment years 1974-75 and 1975-76 were in identical terms.
24.7 In respect of the assessment year 1976-77, however, the facts mentioned in the show-cause notice were slightly different and may be extracted as follows :
A perusal of records of proceedings was made. It is found that you owned 2507 bighas of land in the surroundings of Umed Bhavan at Kota. The value of the aforesaid land was not declared in the wealth-tax return filed by you on 30-9-1976.
The assessment for the assessment year 1976-77 was made by the WTO on 31-3-1978. The value of the aforesaid property could not be brought to charge because of failure on your part to declare the said asset in the return of wealth filed by you. You have, however, filed annexure G-2 along with the return. In the annexure, you have shown the details of land comprising in Umed Bhavan sold to the two co-operative societies. In a note annexed to the said annexure it is mentioned that ‘the land comprising of Umed Bhavan compound was sold to the co-operative societies as per sale agreement dated 18-8-1972. These sale deeds were presented for registration to the Registrar of Kota on 18-8-1972 but the documents have not been realised so far and unless the registration deeds are returned to sellers, the deals are not final and, therefore, the amount is shown under protest. In any case, if the final registration could not be effected, the land would remain exempt under Section 5(1)(iii) of the Wealth-tax Act, as in the past’. The WTO has neither included the cash receipt of Rs. 4,56,000, received by you towards the sale proceeds in your net wealth nor has discussed in the assessment order about the exemption of said land. It reveals from the assessment records that the WTO has failed to make enquiries and to consider the question of exemption of the land. The failure on the part of the WTO in not examining the assessment records and to bring to charge the said property to tax is considered by me to be erroneous and prejudicial to the interests of the revenue.
25.1 In respect of the assessment years 1970-71 to 1974-75 the assessee submitted a common reply dated 14-1-1980, wherein the following points were, inter alia, made out against the proposed action underSection 25(2) :
1. That the assessee had declared in Part IV of the return full facts regarding Umed Bhavan compound and palace and claimed exemption therefor under Section 5(1)(iii).
2. That the matter of exemption of entire Umed Bhavan including compound was discussed by the WTO for the first time in assessment year 1957-58 and after due consideration, the assessee’s claim for exemption to entire Umed Bhavan including compound was conceded to.
3. That the WTO had made due enquiries with regard to the land surroundings Umed Bhavan in the course of the assessment proceedings for the assessment years 1970-71 to 1976-77 which were finalised more or less simultaneously :those for the assessment years 1970-71 to 1974-75 having been finalised on 28-1-1978 and those for the assessment years 1975-76 and 1976-77 having been finalised on 31-3-1978.
4. That the queries of the WTO were duly replied by the assessee vide his letters dated 27-9-1977 and 29-11-1977 and the matter was discussed at length and his attention was also drawn to the proceedings for the assessment years 1957-58 to 1965-66, in the course of which the question of exemption under Section 5(1)(iii) of the Umed Bhavan and the adjoining lands forming part of its compound, was dealt with in great detail and then exemption was granted to the assessee under Section 5(1)(iii).
5. That, therefore, it was not correct to say that there was any failure on the part of the WTO to examine the issue in question and form his opinion about it. He had verified all the facts and had examined all the facts and had also gone through the past records and, therefore, the order passed by the WTO was not at all erroneous and prejudicial to the interests of the revenue.
6. That in the past the revenue had all along accepted that Umed Bhavan including rari and entire compound was entitled to exemption under Section 5(1)(iii) and that, there was no basis for upsetting that finding. The WTO had given exemption to the assessee only after he had been fully satisfied with the explanation of the assessee.
7. That, therefore, it was not warranted to re-open the settled issue under the provisions of Section 25(2) and that as such ‘Your honour would not have jurisdiction in this matter’.
25.2 On merits, the assessee reiterated the same submissions, as he had made earlier in the course of assessment proceedings for the assessment year 1957-58, which have been extracted by us in extenso above in para 8 supra and need not, therefore, reproduced at this stage. Towards the end, the assessee’s submission was summarised in the following words :
That it is needless to mention that entire Umed Bhavan including land, garden, rari, etc., etc., is within one compound wall and no part of it is separated elsewhere from the one compound wall. The entire Umed Bhavan is one building and no part of it on map of Umed Bhavan which includes all land, rari, garden, etc., etc., has been comprised which was duly approved by the Government of India, as one building. Therefore, due to this fact, the entire palace including land, etc., etc., was notified as ‘Umed Bhavan’ being palace of official residence of ex-ruler.
In the light of these facts and circumstances that the entire Umed Bhavan including rari, garden and entire compound which is within one compound wall which has been approved by the Government of India and notified in the Gazette as official residence of ex-ruler is exempt from the purview of wealth-tax under Section 5(1)(iv) of the Wealth-tax Act, 1957. Therefore, the entire 2507 bighas as mentioned by your goodself is within the compound wall of Umed Bhavan and comprises official residence and is also exempt.
25.3 The assessee enclosed two letters from Maharaja Karni Singh of Bikaner and from Maharaja Jaipur in support of his stand. The contents of the letter written by Shri Karni Singh dated 13-2-1969 may be reproduced as follows :
The exemption under Clause 5(1)(iii) of the Wealth-tax Act applied to the official residence of the Ruler. This should include the palatial buildings together with its annexies and guest houses, etc., situated within its boundary as recognised in our maps which were given to the Ministry of States at the time of integration when the question of private properties was settled. In my case, the ITO never raised such a question and he accepted under exemption Lalgarh Palace with its Guest House and Annexies within the area of the palace.
25.4 The contents of the letter written on behalf of the Maharaja of Jaipur were, inter alia, as follows :
Kindly refer to your letter dated 6-2-1969 in connection with the wealth-tax on the palaces exempted.
The Rambagh Palace is no more an exempted Palace since its conversion into Hotel. City Palace is the only Palace which is now exempt. For purposes of exemption the entire compound has been accepted.
An extract copy of AAC judgment in income-tax cases enclosed will also throw light on the point at issue in the wealth-tax cases.
The assessee also invoked the principle of res judicata with regard to the aforesaid subject-matter and submitted in para 9 of his letter as follows :
That it is beyond doubt that question of exemption of entire Umed Bhavan including land has been decided in the assessment year 1957-58 and there is no change in the nature of property, then law of res judicata applied in the above assessment also. There is no change in the property. The property continues the same in all these years and as such the law of res judicata applies in this case and exemption continued to be allowed.
25.5 Similar submissions were reiterated by the assessee in respect of the assessment years 1975-76 and 1976-77 vide his letter dated 14-3-1980.
25.6 The Commissioner’s action under Section 25(2) as is evident from the above was challenged, firstly, on the ground that he had no jurisdiction to initiate action under Section 25(2) as the WTO had not made any error in framing these assessments and that he had examined the matter thoroughly before making up his mind about the exemption claimed by the assessee. Secondly, the Commissioner’s proposed order was resisted on merits also and it was pointed out that there was no justification for him to take the view that he proposed to take.
26.1 After considering the submissions made by the learned counsel for the assessee, the learned Commissioner passed the impugned orders in respect of the assessment years 1970-71 to 1974-75 by a combined order dated 21-1-1980 and in respect of the assessment years 1975-76 and 1976-77 by a combined order dated 19-3-1980.
26.2 In his combined order for the assessment years 1970-71 to 1974-75, the Commissioner justified assumption of jurisdiction under Section 25(2) on the following grounds ;
A perusal of records of proceedings was made. It was found that the assessee owned 2507 bighas of land in surroundings of Umed Bhavan at Kota. The value of the aforesaid land was not declared in the wealth-tax returns filed on 20-1-1971, 28-1-1972, 14-11-1972, 18-8-1973 and 5-12-1974 for the assessment years 1970-71, 1971-72, 1972-73, 1973-74 and 1974-75, respectively. However, in the assessment year 1970-71 during the course of assessment, the assessee had filed two letters dated 27-9-1977 and 29-11-1977 explaining that Umed Bhavan including rari and is exempt underSection 5(1)(iii) of the Wealth-tax Act, 1957. The WTO, however, failed to discuss anything in this regard in the assessment order. The WTO further failed to make enquiries whether the land in question is land appurtenant to the Umed Bhavan and is exempt under Section 5(1)(iii) of the Wealth-tax Act. In the assessment years 1973-74 and 1974-75 also, although no such land was shown in the returns yet in the annexures a note was given to the effect that the land comprising of Umed Bhavan compound was sold to the two co-operative societies as per sale agreement dated 18-8-1972. These sale deeds were presented for registration to the Registrar of Kota on 18-8-1972, but the documents have not been realised so far and unless the registration deeds are returned to the sellers the deeds are not final and, therefore, the amount is shown in protest. The WTO, however, while completing the assessments neither included cash receipt of Rs. 2,40,000 received towards the sale proceeds in the net wealth nor discussed in the assessment orders about the exemption of the said land. It, thus, reveals from the assessment records that the WTO failed to make enquiries and to consider the question of exemption of the land.
On the facts and in the circumstances of the case discussed above, it was considered that the assessment orders passed by the WTO on 28-1-1978 for the assessment years 1970-71, 1971-72, 1972-73, 1973-74 and 1974-75 were erroneous insofar as they were prejudicial to the interests of revenue. It was, therefore, proposed to take action underSection 25(2) of the Wealth-tax Act including an order enhancing or modifying the order or cancelling the order or directing a fresh order to be passed.
26.3 He then referred to the submissions made by the assessee in his joint reply to the notices under Section 25(2) issued to him by the Commissioner and then rejected the same by observing as follows :
Facts of the case and arguments made challenging the validity of action underSection 25(2) on behalf of the assessee are more or less the same as have been discussed in detail in my order dated 23-8-1979 passed under Section 25(2) of the Wealth-tax Act, in this very case for the assessment years 1966-67 to 1969-70 whereby I have set aside the said assessment order to be made de novo I need not repeat the contention raised by the assessee and my observations thereon. For the same reasons as have been elaborately discussed by me in the aforesaid order dated 23-8-1979 and the facts discussed above, I set aside the assessments for the assessment years 1970-71 to 1974-75 also to be made de novo.
26.4 The operative part of the Commissioner’s order reads as follows :
The WTO is directed to value the vast open land measuring 2507 bighas in surroundings of Umed Bhavan, Kota, after giving proper opportunity to the assessee according to law and include the same in the net wealth of the assessee in the assessment years 1970-71 to 1974-75.
26.5 The combined order for the assessment years 1975-76 and 1976-77 was passed in more or less similar vein.
27.1 The aforesaid orders of the Commissioner have been appealed against and are the subject-matter of the present appeals. The hearing of these appeals extended over 3 days, viz., 17-3-1981, 26-3-1981 and 2-4-1981. On 17-3-1981, the revenue was directed orally by the Bench to produce before it the files of the Commissioner wherein he might have kept the record of initiating the proceedings under Section 25(2) and the conduct thereof by him. The record of the WTO containing correspondence, extracts from which had been placed on record in the form of paper books by the assessee, was also required to be produced to appreciate the sequence of events leading to the initiation of the proceedings under Section 25(2). In particular, the following files of the WTO were required to be produced :
1. File for the assessment year 1957-58.
2. Files for the assessment years 1970-71 to 1976-77.
27.2 On the next date of hearing, i.e., 26-3-1981, the files of the Commissioner keeping the records of proceedings under Section 25(2) were produced ; the files of the WTO were also produced. The same were gone through and it was prima facie felt that the Commissioner had not produced before us all the files, which might have affected the formation of his satisfaction that the orders of assessment passed by the WTO were erroneous in so far as they were prejudicial to the interests of the revenue. The Bench, therefore, passed an order on 27-3-1981 observing, inter alia, as follows :
The Commissioner’s files were produced before us yesterday (i.e., on 26-3-1981). On going through them it appears that the Commissioner had looked into some files re : audit objections kept by the Chief Auditor. No note is there on the file as to what was in the audit files. His satisfaction appears to have taken note of the audit objection. It will, therefore, be necessary to look into those files also. They may, therefore, be produced… 2-4-1981 may be fixed for producing the files of the Chief Auditor, which were looked into by the Commissioner.
It is necessary to look into the above files in order to dispose of the contention that the Commissioner’s assumption of jurisdiction under Section 25(2) was not valid. Both sides be informed of the above date and the above subject-matter.
Accordingly, the matter was brought to the attention of both the sides.
27.3 The asssessment records of the WTO, referred to above, were also gone through and it was felt that, in the interest of substantial justice, the following letters/communications/reports borne on the wealth-tax records of the WTO for the assessment years 1957-58 and 1970-71… are necessary to be placed on record :
WT records of 1957-58
1. Letter dated 8-1-1969 written by the WTO Kota to the Tehsildar, Kota, bearing No. K(A)/WT/68-69.
2. Letter of Tehsildar dated 23-1-1969 in reply to the above. Assessment record for 1970-71
3. Extract of A.G.’s letter No. R.As.V/K-126/3344 dated 5-3-1976 (SI. No. 26 of 1970-71 Folder).
4. WTO’s letter No. 13-1/WT/K(A)/70-71 dated 24-10-1977 addressed to the assessee (S1. No. 34).
5. Assessee’s reply to the above letter, dated 29-11-1977.
6. WTO’s letter to IAC, Ajmer B/1/WT/Agr. Land/77-78/1590 dated 3-1-1978 with Annex. A, B and C.
27.4 On 2-4-1981, the revenue filed copies of the above letters (1 to 6 mentioned above) and re-submitted the files of the Commissioner under Section 25(2) (which had, in the meanwhile, been taken back by the Commissioner), but objected to the production of the files of the Chief Auditor and made, inter alia, the following submission with regard to them :
On carefully going through the order passed by the Commissioner under Section 25(2) of the Act, which are presently in appeal before the Hon’ble Bench, I find that there is no reference whatsoever in the orders about any audit files or audit report. I have also gone through the Commissioner’s office files and I could not find anything to show that the Commissioner had looked into the ‘files regarding audit objection kept by the Chief Auditor’. Of course, in law, there could be no objection to the Commissioner looking into any departmental records including audit files for assuming jurisdiction under Section 25(2) of the Act. For the sake of argument, even if the Commissioner had looked into the audit files in this case, it could not at all have affected the validity o assumption of jurisdiction by him under Section 25(2) of the Act….
27.5 Without prejudice to his above objections, the learned departmental representative produced the four audit files ‘in a sealed cover’, with the request that ‘These files may be looked into only after the department obtained legal advice in the matter….’
27.6 The learned departmental representative further submitted that the Commissioner has instructed me to submit that, in the facts of the case, he would like to refer the matter to the standing counsel for his advice on various points now arising in this case as a sequel to the aforesaid order dated 27-3-1981 passed by the Hon’ble Accountant Member and from the facts stated above. This will take time and an adjournment is necessary. It was also submitted by the learned departmental representative that ‘for further hearing of the case the department will like to engage standing counsel for which purpose too an adjournment is necessary’. The learned departmental representative further averred that :
I am also directed to submit that since certain records have already been examined by the Hon’ble Accountant Member in his chamber without the presence of the parties, natural justice demands that the points noted and the inference drawn by the Hon’ble Accountant Member from such examination may kindly be intimated to us and an opportunity provided to us to make necessary submissions about the same in the Court.
27.7 A copy of the above-mentioned submissions of the revenue was given to the opposite side and both the sides were heard in detail. Thereafter, the Tribunal passed the following order on the department’s application :
Both the sides have been heard with regard to the departmental representative’s application for adjournment. It is opposed by the assessee’s counsel on the ground that all the points in appeal have already been heard at length over two days and that nothing further remains for arguments. We notice that the departmental representative has complied with all the requirements of the Tribunal except with regard to audit files. With regard to the latter, the departmental representative’s submissions are contained in para 4 of his application and inasmuch as he has stated that the Commissioner had not looked into the audit files, their production does not appear necessary, and, therefore, nothing remains to be argued with regard to their production. Both the sides have already made their detailed submissions on earlier days of hearing and neither side has anything further to say by way of submissions on the points already argued. The Bench has also no further clarifications to seek. Therefore, no rationale was left in granting adjournment of these appeals, which as noted above, have already been fully argued. The application, is, therefore, rejected.
27.8 With regard to the contents of para (9) of the revenue’s application, it was clarified that whatever further information had appeared necessary to the Bench in the interest of substantial justice had already been solicited by it and supplied by the parties and that the stage of drawing inferences will arrive only after the hearing was finally over. After hearing both the sides with regard to the papers submitted by them, the hearing was closed on 2-4-1981 and judgment reserved.
28.1 The assessee’s learned counsel’s arguments were two-fold. Firstly, he challenged the assumption of jurisdiction by the Commissioner under Section 25(2) and secondly, he urged that the orders of the WTO were not erroneous, nor prejudicial to the interests of the revenue.
28.2 Apart from relying on the arguments and submissions made by the assessee before the Commissioner and before the WTO, to which reference has been made by us in extenso above, the learned counsel made the following particular submissions :
1. That it was not correct on the part of the learned Commissioner to say that the assessee had not declared the land forming part of the compound of Umed Bhavan in his wealth-tax returns. Specific reference to the said property was made in Part IV of the returns read with annexures concerned in the returns filed for the assessment years 1971-72 to 1976-77. In respect of assessment year 1970-71, specific queries were made from the assessee by the WTO and the learned Commissioner himself admits that the replies of the assessee dated 25-9-1977 and 29-11-1977 were before the WTO wherein the assessee had given full details regarding the land comprised in the compound of Umed Bhavan palace and had further claimed exemption in respect thereto in terms of Section 5(1)(iii), after claiming that the said lands were not agricultural lands.
2. That it was not factually correct for the learned Commissioner to have observed that the WTO had failed to make enquiries whether the land in question was appurtenant to Umed Bhavan and was exempt under Section 5(1)(iii). The enquiries on this point were made by the WTO and the assessee pointedly reiterated all these pleadings, which he had earlier raised before the WTO in the course of his assessment proceedings for the assessment year 1957-58 and had urged that the entire land, forming part of the compound of Umed Bhavan palace, was part of the palace and was exempt under Section 5(1)(iii). The aforesaid plea was taken by the assessee not only in his letter dated 25-9-1977, but, again, in his letter dated 29-11-1977. The Commissioner had, therefore, made a mis-statement that the WTO had made no enquiries with regard to the land forming part of Umed Bhavan palace and its size.
3. That it was factually incorrect for the learned Commissioner to have observed that the advance receipts of cash of Rs. 2,40,000 in respect of the assessment years 1973-74 to 1975-76 and of Rs. 4,56,000 in respect of the assessment year 1976-77 were not inclined by the assessee in his wealth. In fact Note No. 2 given by the assessee in Annexure G-2 specifically mentioned that the assessee was showing receipts of advance on the cash basis. In point of fact, pointed out the learned counsel for the assessee, the aforesaid deposits of cash should not have been included by the assessee in his wealth, or alternatively, he should have claimed liability of identical amount, because the aforesaid sums were being held by the assessee not on his own account, but on account of the transactions of sale of lands, and, unless the said transactions had been completed, the money received by way of advance was held by the assessee ‘On account’ and not as his own money. Nonetheless, the assessee had, by mistake, included the cash received by the assessee against the aforesaid agreements to sell as part of his wealth and the Commissioner had clearly ignored to take note of the proper and correct facts on this account.
4. That the mere fact that the WTO had not discussed the claim of exemption of the assessee in his assessment order could not be regarded as an error prejudicial to the interests of the revenue ; what was important was whether the WTO had applied his mind to the problem and had made enquiries in this regard. The facts on record clearly show that the WTO had applied his mind to the problem and had made detailed enquiries and it was only after considering the detailed submissions made by the assessee on the issue in question that he had accepted the submission of the assessee that the entire land comprised in the compound of Umed Bhavan palace was part of the palace and that the said palace was exempt under Section 5(1)(iii). Once, the WTO was satisfied on this point, he need not have made any discussion of this in his assessment order, because normally only such points needed to be discussed in the assessment order about which the WTO wanted to take a stand different from that of the assessee and which was, therefore, likely to become subject matter of appeal before the appellate authorities. The opinion on this point had already been expressed by the WTO right from the assessment years 1957-58 to 1964-65 and inasmuch as the facts remained identical for the years under consideration also, the WTO might not have considered it necessary to make a separate mention of the discussion, which he definitely had had with the assessee on this point.
5. That inasmuch as all the points, which have been mentioned by the Commissioner in his order for the assumption of jurisdiction, have been found to be factually incorrect, the assumption of jurisdiction by the Commissioner on the facts and in the circumstances of the case, was void ab initio and, therefore, the orders passed by him deserved to be quashed.
29.1 On merits, the emphasis of the learned counsel for the assessee has been on the fact that what was exempted under Section 5(1)(iii) was the Umed Bhavan and what constituted the said palace has been specified and agreed upon between the assessee and the Government of India vide the terms of the agreement of merger of the State of Kota in the United States of Rajasthan and reference to which has been made in the letter of the Government of India dated 13-9-1950 and the inventory attached therewith (pages 14 and 15 of the assessee’s 1st paper book) and which reads as follows :
Umed Bhavan including gardens, rari, buildings comprising the entire compound.
29.2 The notification dated 14-5-1954 of the Government of India, in pursuance of the provisions of item (iii) of paragraph 15 of the Part B States (Taxation Concessions) Order, 1950 declared that the Umed Bhavan was one of the palaces, which was recognised by the said Government as the official residence of the former ruler of Kota and the income whereof was exempt in terms of Clause (iii) of Section (1) of Section 15 of the Part B States (Taxation Concessions) Order, which read as below :
Any income falling within the following classes shall be exempted from income-tax and super-tax and shall not be included in the total income or total world income of the person receiving them :
(i) and (ii) ** ** **
(iii) The bona fide annual value of the palaces of Rulers of Indian States which are declared by the Central Government as the official residences of such Rulers.
29.3 When the Wealth-tax Act was introduced in 1957, corresponding exemption was given to the former Rulers of the Indian States vide Clause (iii) of Section (1) of Section 5. The only difference between the concession given under the Income-tax Act and that given under the Wealth-tax was that, whereas under the Income-tax Act, income of two palaces, which were declared as the official residences of the former rulers, was exempt from tax, under the Wealth-tax Act only one of the two official residences, at the choice of the ex-Ruler, was exempted. It was in this context that the Deputy Secretary to the Government of India, Ministry of Home Affairs, Sri V. Vishwanathan, had asked the assessee vide his letter dated 20-1-1958, to exercise his choice with regard to the exemption to be given under Section 5(1)(iii). It was pointed out in the said letter to the assessee that inasmuch as the Central Government had declared more than one palaces as ‘Your Highness’s Official Residence’ and inasmuch as exemption from the wealth-tax was available ‘For only one such building’, we shall be grateful if your Highness will please let us know which palace you would like to select for this purpose. It was in reply to the aforesaid communication from the Ministry of Home Affairs of the Government of India that the assessee had exercised his option for Umed Bhavan Palace vide his letter dated 23-1-1958 (the above letters are placed at SI. Nos. 17 & 18 of the assessee’s first paper book). The combined reading of the aforesaid material would, according to the learned counsel for the assessee, clearly indicate that what was exempted under Section 5(1)(iii) was the Umed Bhavan Palace and, therefore, whatever constituted the said palace would be exempt and there would be no question of trying to make a distinction between the building of the palace and the surrounding land of the palace. The palace consisted not only of the building but also of the area demarcated on the map, which was shown to the WTO in the course of the assessment proceedings for the assessment year 1957-58 and a copy of which has been given by the assessee in its paper book. The entire palace is surrounded by one compound wall and what is contained within it is the palace and, therefore, according to the learned counsel, it is this palace which is exempt under Section 5(1)(iii).
29.4 The learned counsel for the assessee conceded that the Tribunal had decided the issue against him in respect of the assessment years 1966-67 to 1969-70, but submitted that the facts for these years were different from those of the years under consideration and all the material which has been placed by the assessee on record now was not considered by the Tribunal, while deciding the aforesaid appeals. The decision for this year should, therefore, be made by us on the basis of the material now on record, rather than on the basis of the material which was before the learned Members at the time when they gave their decision in respect of the assessment years 1966-67 to 1969-70 and which was taken into consideration by them.
30.1 On behalf of the department, the orders of the Commissioner were stoutly supported and it was emphasised before us with considerable force by the learned departmental representative that we should not depart from the finding given by our learned brothers in the aforesaid appellate order of the Tribunal and that, even if we felt that a different judgment then given by them should be rendered, we should refrain from doing so and should allow the matter to be settled by reference to the Hon’ble Rajasthan High Court. In this connection, he relied upon the following decisions-H.A. Shah & Co. v. CIT [1956] 30 ITR 618 (Bom.), CIT v. S. Devaraj [1969] 73 ITR 1 (Mad.) and CIT v. L.G. Rama-murthi [1977] 110 ITR 453 (Mad.).
30.2 The learned departmental representative read out the following observations of the Hon’ble Madras High Court from the decision in the case of S. Devaraj (supra) :
Before we leave the matter, we would like to make a further observation. We found in this case that the same Tribunal, though manned by different officers, different occasions and with reference to the same assessee and assessments relating to two different years, has come to conflicting decisions on the scope and effect of Section 12(2), which on the face of it, should be embarrassing to the revenue and assessee in general. There is, of course, no provision in the Income-tax Act relating to the matter and the doctrine of res judicata also may not be applicable to the orders of the Tribunal. Even so, in our opinion, it is proper and desirable that when the Tribunal takes a particular view on the scope and effect of a statutory provision, it does not contradict itself and come to a diametrically opposite view later ; but, in such a case, it follows the earlier view and if and when the aggrieved party applies, should make a reference to this Court of the question.(p.ll)
30.3 According to the learned departmental representative, there was no additional or new facts in respect of the appeals under consideration and that all the points, which were raised by the assessee’s learned counsel in respect of these appeals, were raised by him earlier also and that the Tribunal had considered each one of the points raised by the assessee’s learned counsel and the learned departmental representative relied heavily on the order of our learned brothers in respect of the assessment years 1966-67 to 1969-70, referred to above.
31. In the course of hearing it was noticed that different figures were being given at different times with regard to the area surrounding the Umed Bhavan Palace and it was not clear as to how the figure of 2507 bighas mentioned by the Commissioner had been worked out and whether it included the land on which the buildings in question of Umed Bhavan Palace were built up or whether this area was in addition to the area covered by the buildings. Both the department as well as the assessee were required to throw light on this aspect of the matter. In response to the above query of the Bench, the assessee’s learned counsel submitted papers in the form of a paper book, being paper book No. III, which contains the order of the Collector of Kota dated 16-9-1976 requisitioning the Umed Bhavan compound. It appears from the said order that the correct position in this regard is as follows :
Umed Bhavan Compound 2295 Bighas 13 Biswas
Umed Bhavan Building 112 Bighas 10 Biswas
Talkies 20 Bighas
Petrol Pump - 12 Biswas
____________ __________
2428 Bighas 15 Biswas
____________ __________
Thus, the total area of the entire palace including the compound and the buildings, etc., is 2428 bighas 15 biswas and not 2507 bighas or anything higher than that.
32.1 On the basis of the above facts and the rival stands, we have to determine the controversy in the present appeals. We must first deal with the preliminary point made out by the department, namely, that the issue before us stands concluded by the earlier decision of the Tribunal, in respect of the assessment years 1966-67 to 1969-70 in the assessee’s own case and, therefore, we must reject the assessee’s appeals. It will be instructive in this connection to examine the facts of the various cases relied upon by the department and to note the ratio decidendi of the same.
32.2 We will begin with the facts of H.A. Shah & Co.’s case (supra). In that case in the assessment for the year 1941-42, the Tribunal had held that a certain person was a partner in the firm, not in his individual capacity, but as a trustee for his minor son. In the assessments for the years 1942-43 to 1944-45, it, however, went into the question in greater detail and, after considering the facts and certain documents, which were not considered in the assessment year 1941-42. The Tribunal came to the conclusion that he was a partner in his individual right and not as a trustee for his minor son. On these facts, the following question was taken in reference to the Hon’ble Bombay High Court at the instance of the assessee :
Whether in the circumstances of the case, the Tribunal was justified in law in departing from its previous finding that Hiralal was trustee of the minor Vasantlal ?(p. 622)
32.3 While answering the above question, their Lordships stated the law on the point as follows :
As a general rule the principle of res judicata is not applicable to decisions of Income-tax authorities. An assessment for a particular year is final and conclusive between the parties only in relation to the assessment for that year and the decisions given in an assessment for an earlier year are not binding either on the assessee or the department in a subsequent year. But this rule is subject to limitations, for there should be finality and certainty in all litigations including litigation arising out of the Income-tax Act and an earlier decision on the same question cannot be re-opened if that decision is not arbitrary or perverse, if it had been arrived at after due enquiry, if no fresh facts are placed before the Tribunal giving the later decision and if the Tribunal giving the earlier decision has taken into consideration all material evidence. A Tribunal like the Appellate Tribunal should be extremely slow to depart from a finding given by an earlier Tribunal.
There is also a further limitation, namely, that the effect of revising a decision in a subsequent year should not lead to injustice and the Court must always be anxious to avoid injustice to the assessee. For instance, if the Court is satisfied that by depriving the assessee of his rights under the later decision, in an earlier year, the assessee lost an important advantage or lost some benefit which he could have got under the Income-tax Act, then the Court may take the view that departing from the earlier decision leads to injustice or denial of justice and the Court may prevent an Income-tax authority from doing something which would be unjust and inequitable….
When a document is material and it has a considerable bearing upon the very issue that the Tribunal has to decide, a complete omission to consider that document may justifiably lead to the inference that that particular document was not considered by the Tribunal in arriving at its conclusion.(p. 618)
After laying down the above principles, their Lordships held, on the facts of the above case, that-
… under the circumstances it was open to the Tribunal, which dealt with the assessment for the years 1942-43 to 1944-45 to reconsider the question and to come to a different conclusion from that arrived at by the Tribunal which decided the question in the assessment for 1941-42.(p. 619)
32.4 In the case of L.G. Ramamurthi (supra), the principle enunciated by their Lordships of the Bombay High Court in the above case was more or less reiterated. In that case, certain gifts made by members of the HUF were held to be sham by the Tribunal. On a reference to the High Court, no specific question challenging the correctness of this finding was raised. In the subsequent assessment year, a differently constituted Tribunal came to a different conclusion. On a reference to the Hon’ble High Court, at the instance of the department, their Lordships held :
…that in the absence of any fresh material, the Tribunal was not justified in coming to an entirely different and contrary conclusion on the. same set of facts.
Similar observations (as extracted in para 32.2 supra were made, though by way of obiter, by the Madras High Court in the case of S. Devaraj (supra).
32.5 In the case of CIT v. Brij Lal Lohia and Mahabir Prasad Khemka [1972] 84 ITR 273, the Hon’ble Supreme Court had to deal with somewhat similar situation. The facts of that case may, therefore, be noted. The assessee, a dealer in jute, had claimed that on 12-7-1949, he had made a gift of Rs. 5,11,101 to his brother, B and another sum of Rs. 2,50,000 to his nephew, N. Thereafter, B and N started a new firm dealing in jute and at about the same time the assessee stopped his business. On the basis of the material then before it, the Tribunal did not accept the genuineness of the above gifts for the assessment years 1945-46 and 1946-47, and, ultimately, the Supreme Court refused to interfere with this rinding-Mahabir Prasad Khemka v. CIT [1962] 44 ITR 405. In proceedings for the assessment years 1947-48 to 1951-52, considerable additional evidence was adduced and the Tribunal, after taking into consideration the decision rendered in the earlier proceedings, came to the contrary conclusion and held that the gifts were genuine. On these facts, the Hon’ble Supreme Court had to consider if the Tribunal’s aforesaid action was justified. They held :
…that the fact that in the earlier proceedings the Tribunal took a different view of the two gifts was not a conclusive circumstance : the decision of the Tribunal reached in those proceedings did not operate as resjudicata. As seen earlier there was a great deal more evidence before the Tribunal.
32.6 The principle which, according to us, emerges from the review of the aforesaid decisions is that, if the facts remain identical and no additional evidence is placed on record in a subsequent year, the Tribunal should not depart from the decision earlier given by it on the same subject and on the same evidence. If, however, additional evidence has been placed on a record in the subsequent proceedings, the Tribunal is duty bound to take note of the additional evidence, to consider the entire subject-matter de novo in the light of the additional evidence and record its findings in accordance with law, uninhibited by its own earlier order. The earlier decision of the Tribunal, in such a case, would not operate as res judicata and should not be allowed by the subsequent Bench of the Tribunal to fetter its judgment. While disposing of the present appeals, we will, with respect, bear the above principles in mind.
33.1 Section (2) of Section 25 under which the Commissioner passed the impugned orders, reads as follows ;
Without prejudice to the provisions contained inSection (1), the Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by a WTO is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling it and directing a fresh assessment.
33.2 A plain reading of the aforesaid Section makes it clear that, before the Commissioner issues notices under Section (2) of Section 25 giving the assessee an opportunity of being heard : (1) he should call for and examine the record of proceedings before the WTO under the Act and (2) on the basis of such examination, he should hold prima facie opinion that the order passed by the WTO was erroneous insofar as it was prejudicial to the interests of the revenue. Once he comes to have such opinion, he is seized with the jurisdiction under the above Section. The stage to give opportunity of hearing to the assessee comes only after the assumption of jurisdiction as above. Let us, therefore, examine whether the Commissioner properly assumed jurisdiction in the present case.
34.1 The Commissioner has justified in his orders underSection 25(2) his assumption of jurisdiction on the following grounds :
1. That the assessee did not declare in his wealth-tax returns the value of land admeasuring 2507 bighas in the surroundings of Umed Bhavan.
2. That even though the assessee had filed two letters dated 25-9-1977 and 29-11-1977 during the assessment proceedings for the assessment year 1970-71, claiming exemption under Section 5(1)(iii) in respect of the above land, the WTO failed to make enquiries whether the land was, in fact, exempt and discuss this matter in his assessment orders.
3. That in respect of the assessment years 1973-74, 1974-75, 1975-76 and 1976-77, although no such land was shown in the returns, yet in the annexure a note was given mentioning the sale of the said land and the receipt of advance of Rs. 2,40,000 in respect of the assessment years 1973-74 to 1975-76 and of Rs. 4,56,000 in respect of the assessment year 1.976-77. The WTO, while completing the assessments, neither included the cash of Rs. 2,40,000 nor discussed in the assessment order, the claim of exemption under Section 5(1)(iii). He, in fact, according to the Commissioner, made no enquiries on this point and did not consider the claim of exemption at all.
34.2 As can be readily seen, the averment made by the Commissioner in (7) above is immediately contradicted by what he says in (2) above he acknowledges the assessee’s two letters and yet says that the assessee did not give details. It is self-contradictory. Besides, the failure of the assessee to declare his wealth in the returns does not vest in the Commissioner. The jurisdiction to initiate action under Section 25(2); he gets that jurisdiction only if there is an error in the order passed by the WTO- Not making an enquiry, or proper enquiry by the WTO may, of course, render his order erroneous-Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi) and Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and may, thus give jurisdiction to the Commissioner to interfere with the WTO’s order. The facts on record should, however, substantiate the above charge of the Commissioner, but it appears to us, they do not.
34.3 In the present case, as noted above, the record shows (and even the Commissioner’s order asserts it) that the Commissioner had called for the assessment records of the WTO for the assessment years 1957-58 and 1970-71 to 1976-77 and examined them. We have no manner of doubt that a careful examination of the aforesaid files was made by the Commissioner, it should have brought to his attention all such evidence as was placed on those files and to which we have made detailed reference above. In particular, he should have noticed that, in respect of the assessment year 1957-58, there was a detailed query by the WTO with regard to the question of exemption of Umed Bhavan and adjoining lands so much so that the WTO had made his independent enquiries from the Tehsildar concerned and had then issued a show cause notice to the assessee on 1-2-1969 requiring him to explain as to why, out of total area of 880 acres comprising the Umed Bhavan Palace, 720 acres be not regarded as non-agricultural land and on that account a sum of Rs. 2,35,22,400 be not added. It was pointed out by the WTO in the above notice that the exemption granted to him under Section 5(1)(iii) related only to the palace and the land appurtenant thereto and that the land which was not so appurtenant was not exempt and should, according to him, be brought to tax. To the aforesaid letter, the assessee had submitted a detailed reply contained at pages 6 to 13 of the assessee’s first paper book. The contents of this letter have been taken note of in detail by us above. The pith and substance of the arguments contained in that letter was that the entire Umed Bhavan Palace, enclosed in one compound, was one palace and was treated as such in the inventory and in the notification of the Central Government dated 14-5-1954 and that no demarcation line could be drawn for treating only one portion of the palace as official residence and the other portion of the palace as subject to the wealth-tax. The above submission of the assessee was made on 17-3-1969 and the same was accepted by the WTO, who passed the assessment order for the assessment year 1958-59 four days later on 21-3-1969. Reference to this position was made by the asssessee in his letter dated 27-9-1977, while replying to the WTO. As noted above, the Commissioner refers to this letter in his order and it is, therefore, to be presumed that he is aware of the contents of this letter. As noted above, the assessee’s submission to the WTO, as per this letter, was that ‘entire Umed Bhavan including rari and compound is a personal property of the Maharao Sahib and is exempt from the purview of the wealth-tax under Section 5(1)(iii). This point has already been clarified in the assessment relevant to the assessment year 1957-58’. The assessee had further clarified in the aforesaid letter that ‘The land of Umed Bhavan compound is abadi land and not agricultural land’. In this connection, he drew the WTO’s attention towards the letter of Assistant Secretary, Government of Rajasthan No. FLG/17 Rev./A-65, dated 17-9-1966 in which the said Secretary clarified that ‘the said land is not agricultural land but abadi land….’ Therefore, the assessee asserted that the ‘entire land comprising in Umed Bhavan is exempt under Section 5(1)(iii) and the same point has already been finalised in assessment year 1957-58’. Through the aforesaid letter, the assessee clearly brought in the entire correspondence, which had taken place in between the assessee and the WTO during the course of the assessment proceedings for the assessment year 1957-58, on the record for the assessment year 1970-71 and onwards, which were pending on that date and in respect of which simultaneous proceedings were going on before the WTO. The order of the Government of Rajasthan for Umed Bhavan dated 17-9-1966, placed at pages 21 and 22 of the assessee’s paper book was annexed by the assessee to his letter dated 27-9-1977 and as such the Commissioner must have noted it also, while perusing the assessment records of the WTO for the assessment year 1970-71.
34.4 The WTO had issued to the assessee a detailed letter dated 24-10-1977, extracts from which have been quoted above, wherein he had required the assessee to reconcile the holdings of agricultural land as declared by him in the Wealth-tax return in Annexure ‘A’ and these being shown by the revenue authorities in the revenue records (copy of this letter has been filed by the revenue before us). The Commissioner must have noted from this letter that the queries made by the WTO were not only in respect of the assessment year 1970-71 but in respect of ‘assessment year 1970-71 and onwards’. From the ultimate paragraph of this letter, the Commissioner must have further noted that the WTO had made pointed reference to the holdings of agricultural lands by the assessee and the valuation thereof in respect of the assessment years 1970-71, 1971-72 and 1972-73.
34.5 The assessee replied to the aforesaid letter vide his letter dated 29-11-1977, extracts from which have been given by us above (copy of this letter has also been filed before us). In the aforesaid letter, the assessee had made it clear to the WTO that 594 bighas of Kherli Purohit, 559 bighas of Dostpura and 1050 bighas of Khand Caunri were ‘part of Umed Bhavan Palace’ and were, therefore, not agricultural lands. The assessee had further clarified that 304 bighas out of 310 bighas situated in Lodhpura village were also ‘part of Umed Bhavan Palace’. The aggregate Of the above lands is 2507 bi|has (594+ 559-(- 1050+304). It is this figure, which is being mentioned by the learned Commissioner in his show cause notices to the assessee. It is, therefore, reasonable to believe that the learned Commissioner had examined the aforesaid letter of the assessee. The WTO had, as noted above, submitted a report to the IAC on the basis of the aforesaid reply given by the assessee, after verifying the correctness thereof and had, inter alia, made the following observations in his report dated 3-1-1978 :
The main chunk of lands measuring 2203 bighas is comprised in the official palace of His Highness…They include the lands situated in Kherli Purohit, Dostpura, Khand Caunri villages which are now nowhere. It was on this land the palace was built and the villages were removed.(Copy of this report has been placed on record by the revenue.)
34.6 The Commissioner had also examined the assessment records for the assessment years 1971-72 and 1972-73. He must, therefore, have noticed therefrom the declarations made by the assessee in Part IV of his return read with Annexure K claiming exemption under Section 5(1)(iii) with regard to Umed Bhavan, on the ground that it was the official residence of the Maharaja. Similarly, from the return of wealth-tax for the assessment year 1973-74 the Commissioner must have noted that the assessee had declared in Annexure L that exemption under Section 5(1)(iii) was exigible to the assessee with regard to Umed Bhavan ‘including compound’, as it was official residence of the ruler. In respect of the assessment years 1974-75, 1975-76 and 1976-77′, the assessee had similarly claimed exemption with regard to the aforesaid palace including its compound in terms of Section 5(1)(iii) through Annexure L, which formed part of the returns of wealth of the assessee for the respective years. In respect of those years, the assessee had also made declaration with regard to the contemplated sales of the said land with remarks given in Annexure G-2 which have been quoted by us in extenso above and to which the Commissioner also makes limited reference.
34.7 In the face of the aforesaid voluminous evidence on record, we are unable to understand as to how could the learned Commissioner hold the prima facie opinion : (1) that the assessee had not declared in his wealth-tax returns the existence of Umed Bhavan and the compound attached therewith and the size of that compound and (2) that the WTO had failed to make enquiries whether the land in question was appurtenant to Umed Bhavan and was exempt under Section 5(1)(iii). The facts to which we have made pointed reference above clearly go to show (i) that the assessee had placed on record evidence to show that the area of land on which Umed Bhavan was situated including its compound was 2507 bighas and (ii) that the whole of it was encompassed within the boundary wall and formed part of the Umed Bhavan Palace. In fact the WTO had reported this fact to the IAC in his letter dated 3-1-1978, when he had said that the palace was built on the lands, which were formerly part of Kherli Purohit, Dostpura and Khand Caunri villages and that those villages ‘are now nowhere’ and that it was on this land that the palace was built and the villages had been removed. In fact, information on this point had been gathered by the WTO as early as in 1969 in the course of the assessment proceedings for the assessment year 1957-58, when he wrote to the Tehsildar, Kota, on 8-1-1969 asking the area of the land on which Umed Bhavan was situated. In his letter, the WTO had written, inter alia, as follows :
You may be aware, that there is a vast open land situated in the residential area surrounding the Umed Bhavan Palace which is enclosed by iron bars all around.
The Tehsildar’s reply, inter alia, was :
Area of this land is 2732 bighas.
On 882 bighas out of it the building and groves are situated.
On the face of the categorical report of the WTO dated 3-1-1978 and the above information gathered and placed on the wealth-tax record of 1957-58, it is not understood as to how did the Commissioner take the stand that the assessee had ‘failed to produce any evidence that 2507 bighas of land was part and parcel of the official residence of the assessee.’ (see the Commissioner’s observations in para 12 of his order dated 23-8-1979 pertaining to the assessment years 1966-67 to 1969-70, the totality of which has been imported by him into the assessment years under consideration.)
35.1 The facts of the case, as obtained on the record of the present appeals clearly go to show that there was no failure on the part of the assessee in making the requisite declarations in the returns with regard to Umed Bhavan Palace and the adjoining lands, nor was there any failure on the part of the WTO to make enquiries whether the land in question was appurtenant to Umed Bhavan and whether it was exempt under Section 5(1)(iii). The WTO did make elaborate enquiries, applied his mind to the replies submitted by the assessee and submitted his report to the IAC on 3-1-1978 and, it was only thereafter that he completed the assessments in question for the assessment years 1970-71 to 1974-75 on 28-1-1978. The allegation, therefore, that ‘the WTO failed to make enquiries and to consider the question of exemption of the land’ as made by the Commissioner in his impugned orders is without basis and inasmuch as the assumption of jurisdiction has been made by the Commissioner on the basis of the aforesaid averments, it has to be held that the assumption of jurisdiction was not on valid grounds.
35.2 The averment of the Commissioner that the WTO had not discussed the question of exemption under Section 5(1)(iii) in his assessment orders, is, however, correct, but the non-mentioning of a fact, which has been duly enquired into by the WTO and about which the WTO has been taking a consistent stand all along, right from the assessment year 1957-58 to 1964-65, cannot be regarded as an error. Not to make an enquiry would be an error, but not to discuss a subject in the assessment order about which full-fledged enquiry has been made several times and in respect of which there is no more a controversy between the WTO and the assessee is, in our opinion, not an error.
35.3 The very basis, therefore, on which the learned Commissioner held that the orders of the WTO for the assessment years 1970-71 to 1976-77 as erroneous is, according to us, is rooted in allegations, which are not found to be factually correct. It appears to us that the Commissioner has, for reasons, which are not clear to us, chose to ignore to take note of otherwise glaring facts, which are obtaining on the record of the WTO in respect of the assessment years under consideration and has, without due consideration, applied the ratio of his combined order passed by him under Section 25(2) in respect of the assessment years 1966-67 to 1969-70 in respect of the present years also. If the learned Commissioner had applied his mind objectively to the facts relevant for the present appeals and had contrasted them with the facts, as found by the Tribunal vide its combined order dated 31-10-1980 for the assessment years 1966-67 to 1969-70, the following position would have been abundantly clear to him :
1. That whereas, in respect of the assessment years 1966-67 to 1969-70, the assessee had made no reference in his returns to the Umed Bhavan and the area of the land on which it was situated, specific mention thereof has been made by the assessee in the returns filed for the years under consideration.
2. That whereas, in the course of proceedings for the assessment years 1966-67 to 1969-70, the WTO had made no enquiries whatsoever with regard to the question of exemption underSection 5(1)(iii) of the Umed Bhavan Palace and the land appurtenant thereto, the WTO, in respect of the assessment years, under consideration, had made detailed enquiries and had only thereafter concurred with the finding of his predecessor given by him, continuously year after year, in respect of the assessment years 1957-58 to 1964-65, that Umed Bhavan Palace, with its entire compound, was the official residence of the ex-ruler of Kota and was, therefore, exempt under Section 5(1)(iii) and had, accordingly, not added its value to the assessee’s returned wealth, nor deemed it necessary to discuss it in his orders.
3. That whereas, in respect of the assessment years 1966-67 to 1969-70, the assessee had placed no evidence on record with regard to the total area on which Umed Bhavan Palace was situated, evidence on this point had been placed on the record of the years under consideration, vide his letters dated 27-9-1977 and 29-11-1977 and the information, thus given by the assessee, was duly taken note of by the WTO, as is clear from his report to the IAC dated 3-1-1978, referred to above.
35.4 Thus, whereas on the basis of the facts found on the record of the appeals, for the assessment years 1966-67 to 1969-70, it could be said that the assumption of jurisdiction by the learned Commissioner under Section 25(2), on account of the assessee’s failure to place full evidence on record and on account of the WTO’s failure to make proper enquiries was valid, the same cannot be said with regard to the appellate proceedings presently before us.
35.5 The learned Commissioner has also made an issue of the non-inclusion by the WTO of the cash of Rs. 2,40,000 in the assessee’s wealth in respect of the assessment years 1973-74, 1974-75 and 1975-76 and of Rs. 4,56,000 in respect of the assessment year 1976-77. According to the learned Commissioner the non-inclusion of the aforesaid sums was erroneous and prejudicial to the interests of the revenue. We are unable to agree with the above finding of the learned Commissioner, firstly, because the amounts received by way of advance against the agreement to sell did not constitute the assessee’s wealth-tax, these were amounts held on account till the agreement to sell was converted into the sale deed. The sum of Rs. 2,40,000 on the assets side was, therefore, balanced by the corresponding liability, which the assessee should show in his balance sheet on account of the money held by him ‘on account’ for and on behalf of the persons, with whom the agreement to sell had been entered into by the assessee. The non-inclusion of the aforesaid sums could not, therefore, be regarded as an error. Apart from it, the Commissioner could not have come to the above conclusion if he had taken note of Note No. 2 given by the assessee in Annexure G-2, the earlier part of which the Commissioner has noted in his orders. The said Note No. 2 made it clear that the accounts of the assessee were maintained on cash basis and, therefore, it was assured by the assessee that whenever the outstanding would be received by him, ‘the same would be included accordingly’. The assessee’s accounting system being cash, the amount, which he had already received by way of cash, had apparently been included by him in his wealth and, therefore, the averment of the learned Commissioner that the assessee had not included the cash in his wealth-tax return was based on mere surmises and conjectures and ignored the declaration made by the assessee himself. The learned counsel for the assessee has vehemently denied the above allegation and the learned departmental representative has not been able to show to us any material on the basis of which the learned Commissioner could have arrived at the above conclusion. On the contrary, the assessee has filed before us the correspondence (referred to in detail in paras 22.1 land 22.2) which goes to show that the WTO had sought clarification from the assessee on the above point in June 1979, i.e., shortly before he submitted his proposals under Section 25(2) to the Commissioner and the assessee had satisfied him that the cash received by the assessee from the co-operative societies had been deposited in his account with Bank of Rajasthan and that the ‘Bank balances were increased’. The assessee had also produced his cash book and bank pass book to support the above clarification. The WTO was apparently satisfied with his explanation and had not, therefore, mentioned it in his proposals under Section 25(2), submitted to the Commissioner. The Commissioner had, therefore, no material whatsoever to infer that the sums of Rs. 2,40,000 and Rs. 4,56,000 had not been included by the WTO in his wealth. If at all, the Commissioner’s inference is.against the evidence on record and there is no reasonable explanation as to why should the Commissioner’s inference be against the evidence on record and there is no reasonable explanation as to why should the Commissioner have ignored the material on record and taken a stand contrary to facts on record.
36. Inasmuch as the learned Commissioner has given no other reasons for holding the orders of the WTO as erroneous, we have to hold that the learned Commissioner did not assume valid jurisdiction under Section 25(2) in the present cases. As noted above, before the Commissioner assumes jurisdiction under Section 25(2), it is necessary for him to call for the record of the proceedings before the WTO and examine it and hold prima facie opinion on the basis of such examination, that the order of the WTO was erroneous. On the basis of the material on record of the WTO, we are convinced that the Commissioner could not have held, as a person of ordinary prudence :
1. That the assessee had not declared the existence of Umed Bhavan Palace and its surrounding lands in his wealth-tax returns and claimed exemption with regard thereto.
2. That the WTO did not make enquiries regarding the assessee’s aforesaid claim.
3. That he did not include the sums of Rs. 2,40,000 in the wealth for the assessment years 1973-74 to 1975-76 and of Rs. 4,56,000 in the wealth of the assessment year 1976-77 and that the orders of the WTO were erroneous on account of the non-inclusion of the said sums in the assessee’s wealth.
The assumption of jurisdiction by the Commissioner, in the circumstances, cannot be sustained. Accordingly, for this defect itself, we quash his orders.
37.1 On merits also, we are unable to sustain the orders of the learned Commissioner. Clause (iii) of Section (1) of Section 5 under which the assessee has claimed the exemption with regard to Umed Bhavan Palace and its entire compound reads as follows :
5.(1) Subject to the provisions of Section (1A), wealth-tax shall not be payable by an assessee in respect of the following assets and such assets shall not be included in the net wealth of the assessee-
(1) and (ii) * ** **
(iii) any one building in the occupation of a Ruler, being a building which immediately before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, was his official residence by virtue of a declaration by the Central Government under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950 ;
The aforesaid clause came into operation with effect from 28-12-1971 and was substituted in place of the earlier clause by the Rulers of Indian States (Abolition of Privileges) Act, 1972. The aforesaid clause will, therefore, apply to assessments for the assessment years 1972-73 onwards. In respect of the assessment years 1970-71 and 1971-72, also under appeal before us, clause which would be applicable reads as follows :
(iii) any one building in the occupation of a Ruler declared by the Central Government as his official residence under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950 ;
37.2 From the plain reading of the aforesaid clauses, it would be clear that what was exempt under the said clause was ‘one building’ in the occupation of the Ruler ‘which was his official residence’ by virtue of a declaration by the Central Government under Paragraph 15 of the Part B States (Taxation Concessions) Order. Under the aforesaid paragraph 15(1)(iii), the bonafide annual value of the Palaces of Rulers of Indian Satates which are declared by the Central Government as the official residences of such rulers, was not to be included in the ex-ruler’s total income. A notification under the aforesaid Clause (iii) of Clause (7) of Section 15 was issued by the Government, of India in the Gazette of India on 22-5-1954, being SRO 1619 appearing at page 16 of the assessee’s first paper book. According to item No. 21 of the aforesaid notification, Umed Bhavan and City Palace belonging to the Ruler of Kota, were declared by the Central Government to be the Palaces which were ‘the official residence of the former Ruler of the State of Kota’. As exemption under Section 5(\)(iii) was to be available to only one ‘building,’ the Deputy Secretary in the Ministry of Home Affairs, Sri V. Vishwanathan, as noted earlier, asked the assessee, vide his letter dated 20-1-1958, to ‘let us know as to which palace you would like to select for this purpose*. It was in reply to the aforesaid letter of the Deputy Secretary to the Government of India, Ministry of Home Affairs, that the assessee indicated his choice on this point and as we know, his choice fell on Umed Bhavan. The provisions of Section 5(1)(iii), Clause (iii) of Clause (7) of Section 15 of the Part B States (Taxation Concessions) Order, the notification issued by the Government of India dated 22-5-1954, the letter of the Deputy Secretary, Ministry of Home Affairs, to the assessee dated 20-1-1958 and the assessee’s reply thereto dated 23-1-1958, have, in our opinion, to be read together to ascertain the scope of exemption granted by Clause (iii) of Section (1) of Section 5. The words used in the Part B States (Taxation Concessions) Order, are ‘Palaces of Rulers of Indian States’. The words used in Clause (iii) of Section (1) of Section 5, on the other hand, are ‘building in the occupation of a Ruler’. Apparently, there is use of different words in the two Acts ; in the one, there is the use of the word ‘Palace’ whereas, in the other, there is the use of the word ‘building’. Prima facie, therefore, it may be urged that the two words ought to convey two different meanings. There might have been some force in the above contention, if both theSections did not contain the adjectival clauses which identified the ‘building’ or the ‘palace’. The adjectival clause used in Clause (iii) of Section (1) of Section 15 of the Part B States (Taxation Concessions) Order reads as follows :
which are declared by the Central Government as the official residences of such rulers.
In Clause (iii) of Section (1) of Section 5, as it stood prior to its amendment by the Rulers of Indian States (Abolition of Privileges) Act, 1972, with effect from 28-12-1971, the adjectival phrase reads as follows :
declared by the Central Government as his official residence under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950.
In the amended clause the aforesaid adjectival clause reads as follows :
being a building which immediately before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, was his official residence by virtue of a declaration by the Central Government under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950 ;
Clause (iii) of Section (1) of Section 5, both in its original and in its amended form, thus, not only links up the concession granted by the aforesaid clause to that granted by paragraph 15 of the Part B States (Taxation Concessions) Order, but also makes it clear that what is being exempted under Clause (iii) of Section (1) of Section 5 is the ‘building’, which was the official residence of the ex-ruler by virtue of the declaration made by the Central Government under paragraph 15. Thus, this adjectival clause, establishes the identity of the building to which the exemption is to be granted ; it is the same as is described as ‘Palace’ in Clause (iii) of Section (1) of para 15. In this manner, despite the use of the two different words in the aforesaid clauses of the two Acts, the Legislature has made its intention abundantly clear, through the use of the adjectival clause, that the scope of the exemption under Section 5(1)(iii) is the same as that under para 15(1)(iii). It is with regard to the ‘building’ or the ‘Palace’ declared as the official residence by the Central Government. The word ‘building’ in the setting and the context in which it appears, has to be understood in the sense of ‘the Palace’.
37.3 What was declared as the official residence of the Ruler of Kota, under notification No. SRO 1619 dated 22-5-1954 issued in pursuance of the provisions of item (iii) of paragraph 15, was the ‘Palace’ of Umed Bhavan. What is this Palace was specified in item No. 2 of the inventory of the private properties of His Highness the Maharaja of Kota, as approved by the Ministry of States, vide their order dated 31-8-1950 (contained at pages 14 and 15 of the.assessee’s first paper book) and this specific action, as we have noted above, reads as follows :
Umed Bhavan including gardens, rari, buildings, comprising the entire compound.
That this specification is sacrosanct and beyond the pale of even the Rajasthan Land Reforms and Acquisition of Land Owners Estate Act, 1963, was made clear by the letter of the Additional Chief Secretary to the Government of Rajasthan, Jaipur, addressed to the Collector, District Kota dated 17-9-1966 placed at SI. No. 21 of the assessee’s first paper book, wherein the Additional Chief Secretary stated, inter alia, that “Having regard to the definition of the words ‘estate’ and ‘land’ as given in the Rajasthan Land Reforms and Acquisition of Land Owners Estate Act, ‘Umed Bhavan’ including gaidens, rari, building, etc., comprising the entire compound entered in the inventory of the private property of His Highness, Kota, mentioned in the covenant, cannot be regarded as estate for the purposes of the aforesaid Act.”
37.4 The difficulty experienced by the Commissioner, while passing the orders underSection 25(2) for the assessment years 1966-67 to 1969-70, was that he was, at that time, under the impression that the land admeasuring 2507 bighas was not appurtenant to the building and was not part of the building of Umed Bhavan (see paragraph 9 of his order) but was over and above that. He also found, after examining the inventory of the private properties of the Maharaja approved by the Secretary to the Government of India, referred to above, that it ‘did not show that it also included 2507 bighas of open land’. He, therefore, formed the impression that the assessee ‘has failed to produce any evidence that 2507 bighas of land was part and parcel of the official residence of the assessee’, see paragraph 12 of his order. In view of the absence of evidence on this point, he found himself ‘unable to agree with the assessee that such open vast land was part of the building of Umed Bhavan as shown in the agreement with the Government of India…’ He, therefore, treated ‘the open land admeasuring 2507 bighas as not appurtenant to Umed Bhavan and also not exempt underSection 5(1)0’/’) of the Wealth-tax Act’. From the aforesaid reasoning given by the Commissioner it is clear that, even though, according to him, the complex of the buildings of Umed Bhavan constituting the Palace, which was declared as the official residence of the ex-ruler of Kota by the Central Government, was exempt underSection 5(1)(iii) yet the aforesaid land of 2507 bighas was not exempt, as, according to him, there was no evidence to show that it formed part of the said ‘building’ and that it was appurtenant to the said building. The Tribunal, Jaipur Bench, which has affirmed the aforesaid order of the Commissioner also proceeded under the same impression, as is clear from the observations made by them in paragraph 9 of their order as follows :
Another argument addressed by the learned counsel was that Umed Bhavan would include such open vast land admeasuring 2507 bighas, as, according to him, such land was included in the list of inventory of the private property as approved by the Secretary of the Government of India vide his letter dated 31-8-1950. According to this inventory, item No. 2 of the private property is Umed Bhavan including garden, rari, building, etc. The Commissioner has pointed out that it does not show that it also included 2507 bighas of open land and the assessee has failed to produce any evidence even in the list of private properties at SI. No. 2 of the inventory that 2507 bighas of land was part and parcel of the official residence of the assessee. No evidence has been produced before us either to show that land admeasuring 2507 bighas of land was part and parcel of the official residence of the assessee before merger. In fact, as the documents before us do not show to what is the total area of the lands surrounding Umed Bhawan which the assessee is claiming exempt under Section 5(1)(iii) of the Wealth-tax Act. In the absence of any evidence produced before the learned Commissioner or before us, we have no hesitation in holding that the assessee’s claim that 2507 bighas of land were part and parcel of the official residence of the assessee is not proved.
37.5 The aforesaid impression, as we have shown above, cannot be allowed to persist in the fact of the additional evidence, which has been placed by the assessee on record in the course of the assessment proceedings in respect of the assessment years presently under consideration. We have recounted above, at length, such additional evidence. It consisted of the following :
1. Letter of the WTO No. K(A)/WT/of 68-69 dated 8-1-1969 addressed by him to the Tehsildar Kota placed in the M.A. File on 1957-58 assessment.
2. The letter of the Tehsildar No. 55 dated 23-1-1969 addressed to the WTO in reply to the aforesaid letter of the WTO.
3. Letter of the WTO No. B-1/WT/K(A)/2062 dated 1-2-1969 addressed to the assessee.
4. Map of the palace which was shown by the assessee to the WTO on 17-3-1969 in the course of the assessment proceedings for the assessment year 1957-58.
5. Extract of A.G’s letter No. RAS/V/K-126/3344 dated 5-3-1976 placed in the Misc. File for 1970-71 of the WTO at SI. No. 26.
6. The assessee’s letter to the WTO dated 27-9-1977.
7. WTO’s letter No. B/l/WT/K (A)/70-71, dated 24-10-1977 placed at SI. No. 34 of the WTO’s Misc. File for the assessment year 1970-71.
8. Reply of the assessee dated 29-11-1977 along with the Annexures A and B giving reconciliation of the agricultural lands held by the assessee and those as per the revenue record.
9. The report of the WTO to the IAC, Ajmer Range, Ajmer, being B/l/WT agricultural land/1977-78/1590 dated 3-1-1978 along with its enclosures being Annexures A, B and C.
10. Letter of the Addl. Chief Secretary to the District Collector, Kota dated 17-9-1966.
11. Order of the District. Collector, Kota dated 16-9-1976 requisitioning the compound of Umed Bhavan.
37.6 On the basis of the evidence contained in the aforesaid documents, it is now possible for us to say that Umed Bhavan Palace is well-demarcated by iron bars all around and that the area, enclosed within the said palace, including the land on which the complex of the buildings constituting the palace, is situated is 2428 bighas and 15 biswas, as given in the order of the Collector of Kota and, therefore, it is no more in doubt as to what constituted the ‘Palace’ which was declared as the official residence of the ex-ruler of Kota by the Government of India in terms of Clause (iii) of Section (1) of para 15 of the Part B States (Taxation Concessions) Order, 1950. Umed Bhavan, in its entirety, was the official residence and inasmuch as the land of 2428 bighas is part and parcel of the said palace, it is, in our opinion, exempt under Section 5(1)(iii) as it forms part of the palace.
37.7 In taking the above view, we are not, in any way, dissenting from the stand taken by our learned brothers. We are giving the above finding on the basis of the evidence which is now before us and which, as we have pointed out above, is an additional evidence, which was either not produced before the authorities below or before the Tribunal, Jaipur Bench, during the course of the appellate proceedings for the assessment years 1966-67 to 1969-70, or to which attention of our learned brothers was not drawn and, therefore, the same were not considered by them, while deciding the aforesaid appeals for the assessment years 1966-67 to 1969-70. That the Tribunal can take a stand different from what the earlier Bench of the Tribunal has taken, provided it has additional evidence before it, is supported, as noted above, by the decision of the Hon’ble Supreme Court in the case of CIT v. Brijlal Lohia and Mahabir Prasad Khemka [1972] 84 ITR 273. We are inclined to believe that, if the evidence which is now before us, had been before our learned brothers also, there would have been no difficulty for them to come to the same conclusion as we, because they would, then, have had no doubt as to what constituted Umed Bhavan Palace.
38. The entire controversy in this case, unfortunately, arose because the learned Commissioner chose to omit to take into account relevant material, which was already on record and which clearly specified as to what constituted Umed Bhavan Palace. There is no controversy between the parties as to the granting of exemption underSection 5(1)(iii) to the Umed Bhavan Palace. The Commissioner is, in fact, duty bound to grant to the assessee the exemption which the law provides and he has, in fact, not said that it should not be given to him. The entire difficulty has arisen because, somehow, the Commissioner got impression and was led to believe that 2507 bighas of land did not form part of Umed Bhavan Palace and that it was not appurtenant to it. If he had paid due regard to the facts in this regard and had himself objectively appraised the evidence, which was already on record, he would have had no occasion to say that there was no evidence on record to show as to what constituted Umed Bhavan Palace. As pointed out earlier, the report of the WTO dated 3-1-1978 to the IAC, Ajmer was categorical and specific on this point. Herein he had pointed out that the land, which was supposed to be agricultural earlier and formed part of certain villages, was no more agricultural, as the palace had been constructed thereon and the villages had, in the bargain, disappeared. Unfortunately, this evidence, as also the information given by the Tehsildar, Kota, to the WTO, dated 23-1-1969, in the course of assessmant proceedings for the assessment year 1957-58 was completely omitted to be taken note of by the Commissioner and it is, on that basis, that he has given the finding that the facts and the circumstances pertaining to the assessment years 1970-71 to 1976-77 are the same as obtained in respect of the assessment years 1966-67 to 1969-70. We have already pointed out that it is not so. Therefore, we are unable to sustain the orders of the learned Commissioner passed by him in terms of Section (2) of Section 25 on merits also.
39. The orders passed by the WTO are not erroneous nor they are prejudicial to the interests of the revenue. The grounds on which the Commissioner held the said orders to be erroneous do not in fact obtain. The WTO had made the detailed enquiries with regard to what constituted Umed Bhavan Palace in the course of assessment proceedings under consideration ; the assessee had also placed full details in this regard on record and the sums of money amounting to Rs. 2,40,000 and Rs. 4,56,000 were duly declared by the assessee as part of his assets on the basis of the cash system of accounting followed by him, even though in fact, they were not his assets. We, therefore, cannot sustain the Commissioner’s orders and so quash them.
40. In the result, we allow the appeals and vacate the orders of the Commissioner.
S.S. Mehra, Judicial Member
1. First of all, I express my regret that the matter could not claim my attention earlier, since I was frequently on long tours and some time on leave.
2. I have the benefit of having gone through the learned order proposed by my learned brother Shri Anand Prakash, the Hon’ble Accountant Member. However, 1 regret a lot that I failed to persuade myself to associate with the conclusion arrived at by my learned brother.
3. The facts have by and large been properly incorporated in the impugned order and more fully by my learned brother. Briefly stated, Shri V.P. Gupta, the learned Commissioner, vide his consolidated order dated 21-1-1980, underSection 25(2), for the assessment years 1970-71 to 1974-75, directed the WTO, after setting aside the assessment orders to value the vast open land measuring 2507 bighas in surroundings of Umed Bhavan to include the same in the net wealth of the assessee, with the following observations :
Facts of the case and arguments made challenging the validity of action underSection 25(2) on behalf of the assessee are more or less the same as have been discussed in detail in my order dated 23-8-1979 passed underSection 25(2) of the Wealth-tax Act in this very case for the assessment years 1966-67 to 1969-70 whereby I have set aside the said assessment orders to be made de novo. I need not repeat the contentions raised by the assessee and my observations thereon. For the same reasons as have been elaborately discussed by me in the aforesaid order dated 23-8-1979 and the facts discussed above, 1 set aside the assessments for the assessment years 1970-71 to 1974-75 also to be made de novo
4. Similarly, the learned Commissioner also set aside the assessment orders, for the assessment years 1975-76 and 1976-77, vide his another consolidated order dated 19-3-1980 with the same observations.
5. In the appeals before us, we are concerned with the question as to whether the learned Commissioner rightly assumed jurisdiction and correctly set aside the assessment orders for all the years under consideration. My learned brother is of the view that the impugned orders of the learned Commissioner cannot be sustained. However, it has not been possible for me to subscribe to the view taken by my learned brother. In fact, exactly the similar issue with respect to the same assessee, in the similar facts were raised before the Tribunal, Jaipur Bench, Jaipur, in WT Appeal Nos. 347 to 350 (Jp.) of 1979, for the assessment years 1966-67 to 1969-70 and the Tribunal vide its consolidated order dated 31-10-1980, dismissed the assessee’s similar appeals in the similar circumstances. All the contentions raised in the appeals before us appear to have been raised earlier before the Tribunal and all such contentions have been discussed there in the order. No convincing reasons could be advanced on behalf of the appellant as to why we should not follow the earlier consolidated order of the Tribunal. I am convinced that the facts and circumstances clearly warrant that there is no need to differ from the said findings of the Tribunal. So, respectfully following the said finding I am of the considered view that the assessee’s instant appeals deserve dismissal and are hereby dismissed.
6. In the result, the assessee’s appeals are dismissed.
THIRD MEMBER ORDER
R.L. Segel, Judicial Member
1. As there was ‘difference of opinion between the learned members hearing these appeals, they had initially referred the following common question to the Hon’ble President, Tribunal, Bombay, for the opinion of the Third Member underSection 255(4) of the Income-tax Act read withSection 24(ii) of the Wealth-tax Act :
Whether, on the facts and in the circumstances of the case, the orders underSection 25(2) of the Wealth-tax Act, 1957 passed by the Commissioner of Wealth-tax in the present case are assessable in law and on fact ?
2. The President, Tribunal, Bombay, in turn had referred the said question to me for opinion.
3. The assessee to these appeals is Mr. Bhim Singhji, the Ex-Maharaja of the erstwhile State of Kota. The point for decision before the Bench hearing the appeals was as to whether the market value of open land admeasuring 2507 bighas in the surroundings of Umed Bhavan, Kota was to be included in the ‘net wealth’ of the assessee for each of the years under consideration. The said issue had arisen in these appeals because the Commissioner underSection 25(2) had set aside the wealth-tax assessments made by the WTO on the ground that those assessments were erroneous, inasmuch as, they were prejudicial to the interests of the revenue. For so holding, the Commissioner had relied on his earlier order dated 23-8-1979 passed in the case of the assessee underSection 25(2) for the assessment years 1966-67 to 1969-70. It may be added over here that the said order of the Commissioner dated 23-8-1979 was the subject-matter of appeals before the Tribunal bearing WT Appeal Nos. 347 to 350 (Jp) of 1979 decided on 31-10-1980, whereby the appeals of the assessee against the said order of the Commissioner were dismissed.
4. While deciding the appeals, leading to the present reference to me under the orders of the learned President, Tribunal, Bombay, the learned Accountant Member has, inter alia, held that the facts in the years under consideration are not the same as they were in the assessment years 1966-67 to 1969-70 and, as such, the earlier decision of the Tribunal was distinguishable. The learned Accountant Member in the later part of his order has also, for the reasons stated therein, held that the above mentioned 2507 bighas of land formed part of the Umed Bhavan and that the assessment orders passed by the WTO were neither erroneous nor prejudicial to the interests of the revenue. The assumption of jurisdiction by the Commissioner was not valid. The earlier order of the Tribunal in the wealth-tax appeals against the consolidated order of the Commissioner underSection 25(2) for the assessment years 1966-67 to 1969-70 had to be ignored in view of the presence of additional evidence brought out in the years under consideration, i.e., the assessment years 1970-71 to 1976-77 detailed in paragraph 37.5 of the learned Member’s order.
5. The learned Judicial Member has, however, differed from the above conclusions of the learned Accountant Member as he, inter alia, has held that the facts in the years under consideration were similar to those in the earlier years and so the earlier decision of the Tribunal dated 23-10-1980 squarely applied in the present case. The appeals of the assessee merited dismissal.
6. The position, being as stated hereinbefore, I, while hearing these appeals as Third Member, was of the prima facie view that though one of the points on which the learned Accountant Member and the learned Judicial Member have also differed was as to whether the facts in the years under consideration are similar to those in the assessment years 1966-67 to 1969-70, yet that difference between the learned Members had not been referred underSection 24(ii) of the Wealth-tax Act read withSection 255(4) of the Income-tax Act. I, therefore, after reviewing the case law on the subject, vide my order dated 26-8-1982, had submitted the case to the Hon’ble President, Tribunal, Bombay, for further directions in the matter by observing as under :
Since the Members hearing the appeal have not referred the difference of opinion between them, on the point as to whether the facts in the years under consideration are similar to those in the assessment years 1966-67 to 1969-70 or not and since that difference has to be resolved before deciding the aforesaid issue referred by the Members for the opinion of the Third Member, I, in these circumstances have no other alternative but to abstain from giving my opinion on the question referred to me for opinion by the Hon’ble President. In these circumstances, I submit the papers to the Hon’ble President for further directions in the matter.
7. The case was, thereafter, placed before the learned Members hearing the appeals and they in turn have also referred the following questions to me as Third Member in addition to the question already referred :
1. Whether the facts in the years under consideration are similar to those in the assessment years 1966-67 to 1969-70 ; and
2. If the answer is in the affirmative or negative, what should be the decision in the present case.
It may be added over here that the learned Members, while referring these additional questions, have observed that those questions were being referred ‘as per the suggestion of the Third Member’.
8. At the hearing by me as Third Member, the learned counsel for the assessee, Mr. C.S. Agarwal, raised, preliminary objection that the above reference of the aforesaid additional questions was invalid in the eyes of law, in terms of Section 255(4) of the Income-tax Act read withSection 24(ii) of the Wealth-tax Act, inasmuch as the Third Member to whom a case has been referred on difference of opinion between the learned Members originally hearing the case could not formulate a new point as was done in the present case. The aforesaid additional question has been referred to the Third Member by the learned Members who originally heard these appeals, at the instance of the Third Member. This was clear, because the learned Members, who originally heard these appeals, have referred the aforesaid additional questions by observing ‘at the suggestion of the Third Member, we refer the following question also to him for his opinion’. These arguments are controverted by the departmental representative who has urged that the aforesaid additional questions have been referred by the learned Member originally hearing the appeals and that the Third Member himself had not formulated the said questions.
9. I have given consideration to the above arguments. There can be no quarrel with the legal proposition that the Third Member, to whom a case is referred on difference of opinion between the Members originally hearing it, is competent to decide only the point or points on which the Members of the Bench originally hearing the case had differed. He cannot himself formulate a new point on which he could record his decision. See in this connection, the decision of the Allahabad High Court in Jan Mohammed v. CIT [1953] 23 ITR 15 and of the Patna High Court in Hanutram Chandanmul v. CIT [1953] 23 ITR 505. This aspect has already been dealt with by me in my aforesaid earlier order dated 26-8-1982. But the said decisions have no application in the present case. The Third Member initially hearing the appeals noticed, as per his aforesaid order dated 26-8-1982, that there was difference of opinion between the Members originally hearing these appeals on the points now brought out in the aforesaid additional question No. 1 He in view of the ratio of the aforesaid decisions, was of prima facie view that he was precluded by law from deciding the said difference of opinion as now brought in the aforesaid additional question No. 1. Thereafter, the matter was placed before the learned Members originally hearing the appeals. They, after due application of their mind, have referred the aforesaid additional questions to the Third Member, may be observing ‘as per the suggestion of the Third Member’. Whatever be the fact remains that the said additional questions have been referred by the Members originally hearing the appeals. The Third Member himself has not formulated the said questions over and above the ‘heads’ of the learned Members originally hearing these appeals. The Members originally hearing the appeals have referred the aforesaid additional questions for the opinion of the Third Member. The ratio of the aforesaid authorities relied upon by the learned counsel of the assessee, Shri C.S. Agarwal, has, therefore, no application to the facts of the present case. The said additional questions have been referred to me as Third Member by the Members originally hearing the appeals. The preliminary objection of the learned counsel for the assessee has, therefore, no merit and is hereby rejected.
10. As already stated, the assessee is the ex-ruler of the erstwhile Kota State. The said State of Kota was merged in the United States of Rajasthan in 1948-49. Thereafter, the question of the private properties of the Rulers of the merged States including the then Ruler of Kota was taken up for consideration by the Government of India, which vide Ministry of States D.O. Letter No. F.66-P/49 dated 13-9-1960 (at pages 14-15 of the paper book filed by the assessee) intimated the assessee regarding his private properties including, inter alia, ‘Umed Bhavan including gardens, ran, buildings comprising the entire compound’.
10.1 Subsequently, in pursuance of the provision of item (iii) of the Part B States (Taxation Concessions) Order, the Government of India issued the notification dated 14-5-1954 (at page 16 of the paper book). This notification read with the annexure thereto declared, inter alia, ‘Umed Bhavan, Kota’ as the palace for the purpose of para 15. Pursuant to the issuance of the said notification, certain concessions with regard to the payment of income-tax came to be granted to the assessee, an ex-ruler of the erstwhile State of India. One of the concessions given was not to tax the property income from such a palace. The said notification dated 14-5-1954 was issued by the Government of India in connection withSection 60A of the Indian Income-tax Act, 1922, which was published in the Gazette of India dated (sic) May 1954.
11. The Wealth-tax Act came into operation with effect from 1-4-1957. Naturally, that led to the consideration by the Government of India of the question of exemption from wealth-tax any one building in occupation of an erstwhile ruler declared by the Central Government as his official residence under the notification of the type referred to in the preceding paragraph. On 20-1-1958, Mr. V. Vishwanathan of the Ministry of Home Affairs, Government of India, addressed a letter (at page 17 of the paper book) to the assessee with regard to the exemption to be available to him in this behalf. The relevant extract of the said letter reads as under :
As Your Highness may be aware,Section 5(1)(iii) of the Wealth-tax Act, exempts from the wealth-tax any one building in the computation of a Ruler declared by the Central Government as his official residence under para 13 of the Merged States (Taxation Concessions) Order, 1949, or para 15 of the Part B States (Taxation Concessions) Order, 1950. The notifications regarding the official residence, which have been issued by the Central Government for the purpose of income-tax will, therefore, apply for the purpose of the wealth-tax also and not fresh or further declaration by the Central Government is necessary. In case, where more than one building has been declared by the Central Government as the official residence of a Ruler, the Rulers concerned have to select the particular building in respect of which they would like exemption underSection 5(1)(iii) of the Wealth-tax Act.
2. We notice that Central Government have declared more than one palaces your official residence. Since the exemption from the wealth-tax is available for only one such building, we shall be grateful, if Your Highness will please let us know which palace you like to select for this purpose.
12. The assessee, vide his letter dated 23-1-1958 in his reply to the letter (at page 18 of the paper book) mentioned towards the end of the preceding para stated as under :
With reference to your letter DOF. No. 23/16/57-Poll. Ill dated 10th instant, I write to request you to kindly move the Government to exempt Umed Bhavan underSection 5(1)(iii) of the Wealth-tax Act.
13. It is not in dispute that in the course of the assessment of the assessee for the assessment year 1957-58, which was the first assessment under the Act, the WTO had raised the question regarding the exemption of the said palace underSection 5(1)(iii) and the extent of its operation. With regard to the said Palace, the stand of the assessee as is clear from his letter dated 2-1-1969 (at pages 1-2 of the paper book) addressed to the WTO, was that ‘the total area of Umed Bhavan Palace comprising entire compound admeasuring 880 acres’ being his official residence was exempt underSection 5(1)(iii). ‘The compound is meant for keeping various types of animals, cows, farming and small fruit gardens’. In reply, the WTO wrote to the assessee the letter dated 1-2-1969 (at pages 3 to 5 of the paper book) stating, inter alia, as follows ;
Revenue authorities of the State Government have given me to understand that the area of the compound surrounding the Umed Bhavan Palace is 2732 bighas and out of this about 892 bighas is used for agriculture and fruit garden. The rest of the land, i.e., 2/3rd part of the total area is neither lying barren or used for keeping various types of animals. This fact has also been admitted in your letter under reference.
Under the definition of ‘asset’ in Wealth-tax Act, 1957 assets include ‘property of every description movable or immovable but does not include agricultural land’. According to this definition, only the agricultural land or the land which is used for any other purposes such as for forest, animals is not exempt from wealth-tax….
The WTO in the said letter drew the attention of the assessee to the decision of the Gujarat High Court in the case of Rasiklal Chimanlal Nagri v. CWT [1965] 56 ITR 608 and went on to point out as under :
Your vast land surrounding the palace satisfies the conditions laid down in Nagri’s case. The exemption granted to you underSection 5(1)(iii) relates only to the palace and the land appurtenant thereto. There is no other Ruler in Rajasthan, who has claimed exemption from such a vast non-agricultural land of over 800 acres situated within the municipal limits or in the residential area as in your case. Hence, in your case, I intend, to treat a part of the said 800 acres as not agricultural urban land liable to wealth-tax. The area works out as under :
Area of the total land
(as shown in your letter) 880 acres
Less : considered necessary
for garden, lawns, etc. for
personal residence as a Ruler 80 acres
__________
800 acres
__________
Less : one-tenth of the total
land for possible development
got out residential place, etc. 80 acres
Palace land known as
agricultural land 720 acres
Changed in the sq.
yards and sq. ft. 34,84,800 sq. yards
3,63,63,200 sq. ft.
The present market value of the non-agricultural land in the area is about Rs. 2 to 3 per sq. ft. It is, however, true that there has been an appreciation in the valuation of price during the period from 1956 to 1969. In any case, the price in 1956 cannot be less than 75 paise per sq. ft.
Taking the valuation at that rate for 3,63,63,200 sq. ft. the value of non-agricultural land in your case comes to Rs. 2,35,22,400 which will be added to the net wealth for the assessment year 1957-58.
Although the opportunity has been given by me to your representative on 27-12-1968 and I am giving one more opportunity to show cause why the valuation may not be taken as under.
14. The aforesaid letter of the WTO was replied to by the assessee vide his letter dated 17-3-1969 (copy at pages 6 to 13 of the paper book) wherein the assessee, inter alia, for the reasons brought out therein, urged that the entire Umed Bhavan Palace comprised in one compound was one palace and was treated as such in the inventory and Notification of the Central Government dated 14-5-1954 and so the same was exempt underSection 5(1)(iii) of the Act. This was followed by the discussion between the WTO and the assessee’s counsel on 17-3-1969 when a map of the Umed Bhavan Palace, the extracts from White Paper of the Indian States (Taxation Concessions) Order and the commentary of A.C. Sampath Iyengar in his book Three New Taxes, 2nd edition were shown and gone into. Thereafter, on 21-3-1969, the WTO passed the assessment order for the assessment year 1957-58. Therein, there was no discussion regarding the exemption claimed underSection 5(1)(iii) regarding the Umed Bhavan, including gardens, rari and building, etc. At the same time, it is correct that no addition on account of the market value of the said Umed Bhavan and for the land attached thereto was made to the net wealth of the assessee for the said year.
15. The position in the matter of the inclusion of the market value of Umed Bhavan Palace along with the land attached therewith for the assessment years 1958-59 to 1964-65 as brought out in the assessment orders for those years is as under :
"Year of Observations by the WTO
assessment Umed Bhavan Palace compound
1958-59 is exempt under Section 5(1)
(iii)
1959-60 -do-
1960-61 Umed Bhavan Palace and
compound is exempt under
1961-62 Section 5(1)(iii) Hence,
1962-63 they are not included.
-do-
Umed Bhavan Palace and
1963-64 compound is exempt under
1964-65 Section 5(1)(iii) wrongly
stated as Section 5(1)(iv)
in the assessment order
... Hence, they are not
included.
-do-
While dealing with the
exemption claimed by the
assessee under section
5(1)(iv) regarding the
Garh property, which
was claimed to be in
self-occupation, the
WTO has observed as
under :
'In respect of exemption
under Section 5(1)(iv),
in my view, this exemption
is not available to the
assessee, as the exemption
is provided in respect of
a house belonging
to and exclusively used
by him for residential
purposes.
In fact, the assessee
is a Ruler and has already
got exemption under
Section 5(1)(iii) of the
Wealth-tax Act, 1957, in
respect of a building
occupied by him. He is
residing in this building
and as such, he cannot
avail of the concession
provided under Section
5(1)(iv).'
It may be added that in the assessment order for the said year, i.e., the assessment year 1964-65, the WTO has not recorded the details of the property in respect of which the exemption has been allowed underSection 5(1)(iii). It is, however, correct that in the assessment order for that year, the WTO has not included the market value of Umed Bhavan Palace and for the land attached with it in the net wealth of the assessee for that year.
16. It is not in dispute that in the wealth-tax returns for the assessment years 1966-67 to 1969-70, the assessee had not disclosed the value of the Umed Bhavan Palace and the land attached thereto in Part IV of the returns to claim exemption underSection 5(1)(iii). The WTO in the assessment orders for those years also did not make any mention therein that Umed Bhavan and the land attached thereto was exempt under Section 5(1)(iii).
17. Admittedly, these assessment orders for the assessment years 1966-67 to 1969-70 were the subject-matter of the order of the Commissioner, Jaipur underSection 25(2). After the assessee had submitted his reply to the show cause notices issued by the Commissioner underSection 25 in respect of those years he, after deliberation, had held that the assessment orders passed by the WTO for those years were erroneous insofar as they were prejudicial to the interests of the revenue. Those assessment orders were, accordingly, set aside by the Commissioner with a direction to the WTO that the assessment for those years should be made de novo. The WTO was directed to value the vast open land admeasuring 2507 bighas in the surrounding of Umed Bhavan, after giving proper opportunity to the assessee according to law and to include the same in the net wealth of the assessee in each of those years.
18. It is also an admitted position that the said consolidated order of the Commissioner underSection 25(2) referred to in the preceding para, was the subject-matter of appeals before the Tribunal, Jaipur Bench, Jaipur bearing WT Appeal Nos. 347 to 350 (Jp.) of 1979 decided on 31-10-1980. By the said consolidated order, the Tribunal, for the diverse reasons stated therein, upheld the said order of the Commissioner subject to the modifications that ‘in case the area surrounding Umed Bhavan is 2507 bighas, then only such area as left after excluding the land appurtenant to Umed Bhavan as are necessary for the reasonable use and enjoyment of the building will only be included in the net wealth but in no case, the inclusion should be more than 2507 bighas of land in view of the order of the Commissioner’.
19. I now come to the years under consideration, i.e., the assessment years 1970-71 to 1976-77. The position taken by the assessee in the wealth-tax returns filed by him for those years in Part IV thereof is as under ;
————————————————————-
Year of Name of the Observation Observation
assessment property in Part IV in Part IV
1 2 3 4 regarding of exemption
the ann- claimed
exures
-------------------------------------------------------------
1970-71 Umed Bhavan, There is no claim regarding
Kota exemption under Section 5(1)
(iii) either in Part IV of
the return or in any
annexure to the return.
1971-72 -do- As per Annexure Section 5(1)
'K' (iii).
1972-73 -do- -do- This house is
official resi-
dence of ex-ruler.
Hence, the value
exempt under
Section 5(1)(iii)
1973-74 -do- As per annexure This house including
'L' the compound is
official residence
of ex-ruler. Hence,
value is exempt under
Section 5(1)(iii)
1974-75 -do- do- This house including
the compound is a
official residence of
ex-ruler, hence, the
value is exempt under
Section 5(1)(iii)
1975-76 -do- -do- -do-
1976-77 -do- -do- -do-
-------------------------------------------------------------
It may be added that in the extract given by the assessee at page 70 of the paper book, the reproduction other than what has been stated above is not correct. This is based on checking done by me at the time of the hearing with the help of the original records.
20. It appears that prior to the completion of the wealth-tax assessment for the year under consideration, the Accountant General, Rajasthan vide letter No. RAS/V/K-126/3344, dated 5-3-1976, had forwarded to the Commissioner an Audit Note on the review of the assessments of the agricultural land for the wealth-tax, gift-tax, etc. The relevant extract pertaining to Income-tax Ward, Kota, of the said Audit Note at page 3 of the paper book filed by the revenue reads as under :
——————————————————-
SI. Particulars of Particulars of land
No. the assessee
-------------------------------------------------------
4. Shri Bhim Singh As per land revenue
of Kota B/3 W.T. records Ladpura Tehsil,
A-Ward, Kota. the assessee had 4815
bighas valued at Rs.
47,42,550
(estimated by A.C.M.
Kota).
The wealth-tax assessments
of the assessee were stated
to be pending from the
assessment year 1965-66.
It was noticed from the
wealth-tax return that
the assessee had shown
1342 bighas valued only
Rs. 56,348 since the
assessment is not
finalised as yet, the
omission as well as under-
statement of the valuation
needs to be not examined
before completing the assess-
ment.
Value of land as on 1-4-1970
Rs. 47,42,550.
21. In the paper book filed by the assessee, there is a letter dated 27-9-1977 (at page 67 of the paper book) addressed by the assessee to the WTO on the subject ‘in the matter of wealth-tax of Maharao Bhim Singhji Sahib of Kota-Assessment year 1970-71’ reading as under :
1. ** ** **
2. As regards the point raised by your goodself that whether land comprising in the Umed Bhavan is agricultural land or urban land or abadi land. In this connection, we submit that entire Umed Bhavan including rari and compound is a personal property of the Maharao Sahib and is exempt from the purview of the wealth-tax underSection 5(1)(iii) of the Wealth-tax Act, 1957. This point has already been clarified in the assessment relevant to the assessment year 1957-58.
The land of Umed Bhavan compound is Abadi land and not agricultural land. In this connection we draw your kind attention towards the letter of Assistant Secretary, Government of Rajasthan No. FLG/17/Rev./A/65 dated 17-9-1966 in which they have clarified that the said land is not agricultural land but Abadi land, the copy of which is enclosed herewith. Therefore, the entire land comprising in Umed Bhavan is exempt underSection 5(1)(iii) of the Wealth-tax Act, 1957 and the same point has already been finalised in the assessment year 1957-58.
22. I next find that pursuant to the above Audit Note the ITO-A Ward, Kota had addressed a letter dated 24-10-1977 (at pages 4-5 of the paper book filed by the revenue) to the assessee on the subject ‘agricultural land-details furnishing of-assessment year 1970-71 and onwards-‘ reading as under :
From the perusal of the wealth-tax assessment records and Tehsil record, I found that you have shown 1342 bighas as on 31-1-1970, whereas in Tehsil records it is 5031 1/2 bighas. You have shown the agricultural lands situated at the following places in the assessment year 1970-71 :
Place Shown by you As per Tehsil records 1. Ram Nagar 4 Bighas 4 Bighas 2. Nanta 507 " 607½ " 3. Arampura 209 " 209¾ " 4. Ramchandrapura 20 " 20 " 5. Kotre 22 " 22 " 6. Teekra 22 " 486 " 7. Ladpura 2 " 310 " 8. Rampura 500 " 530 " 9. Prahladpura 52 " 352 ">
I have also found that the following agricultural land sare standing in your name in Tehsil records, but no such land was shown in the Annexure filed with the return. You are kindly requested to explain the position and send reply on or before 26-10-1977 positively.
Place As per Tehsil records 1. Sheopura 11 Bighas 2. Rangbari 27 " 3. Bhimpura 36 " 4. Rampura 54 " 5. Umed Ganj 138 " 6. Kherli Purohit 594 " 7. Dostpura 559 " 8. Khand Caunri 1050 " 9. Kishorepura 3 " 10. Sakatpura 4 "
You have valued the agricultural land at Rs. 56,348 for the assessment year 1970-71, Rs. 1,69,201 for the assessment year 1971-72 and Rs. 1,30,039 for the assessment year 1972-73. For the assessment year 1970-71, I may point out that you have sold agricultural lands in the month of December 1969 and if average rate of sale is taken as the basis of valuation the value will be very high. You are, therefore, requested to please explain the position of agricultural land owned by you and its valuation.”
22.1 This letter of the ITO has been, it appears, replied by the assessee vide his letter dated 29-11-1977 ‘addressed to him as WTO’ (at pages 6, 7 and 8 of the paper book filed by the revenue) reading as under :
Re : Wealth-tax cases of H.H. Maharao Bhim Singhji Sahib of Kota–Asst. year 1970-71 and onwards-submission on the point of agricultural land- In continuation of your previous submissions and details which we have furnished from time to time we further submit as under :
1. Your goodself has observed that why the agricultural land of Kherli Purohit 594 bighas, Dostpura 559 bighas and Khand Caunri 1050 bighas was not shown in the return.
In this connection, we would like to draw your kind attention to our letter dated 27-9-1977 in which we have submitted that these are not agricultural land. These lands comprise Umed Bhavan which is the official residence of ex-Ruler of Indian State Kota.
In this connection as desired by your goodself we have filed the order of the Government of Rajasthan No. FLG/17/Rev/A/65 dated 17-9-1966 according to which aforesaid lands are not agricultural lands and are comprising in Umed Bhavan which is the personal property of Maharao Shri Bhim Singhji Sahib of Kota-the original order is ready for your kind perusal and verification.
The entire Umed Bhavan is declared as official residence of ex-Ruler which is exempt underSection 35(1)(iii) of the Wealth-tax Act, 1957 and this point has been discussed at length in the past and since then exemption is being allowed.
Therefore, we hope your goodself would now be quite satisfied on this point.
2. The agricultural land 3 bighas of Kishorepura was sold to Shri Ramesh Chand earlier and, therefore, does not belong to the applicant.
3. The agricultural land 4 bighas of Sakatpura is already included in the land which shown at Nanta, therefore, there is no question of treating the same as separate land.
4. The agricultural land 27 bighas of Rang bari were given to ‘Bhudan Yojana’ long back and it does not at all belong and in possession of Maharao Sahib.
5. The land 11 bighas of Sheopura had already been sold in earlier years, therefore, it does not belong to the assessee.
6. The land 36 bighas at Bhimpura belongs to Shri M.K. Brijraj Singh and does not belong to the assessee. The said land was already been sold by Shri M.K. Brijraj Singhji which has been considered in their assessments.
7. The land 54 bighas at Rampura has been sold to Shri Prakash Chand Vijay Kumar and Shivraj Kumar in the year 1968-69 and does not belong to the appellant.
8. The land 138 bighas at Umed Ganj (Kishanvilas) belongs to Shri M.K. Brijraj Singh and does not belong to the assessee.
The said land has also been sold by Shri M.K. Brijraj Singh Sahib and has been considered in their assessment.
We hope your goodself would be quite satisfied from the above.
As regards your goodself’s second query, we submit that there is some difference in area shown in the return by the assessee we submit as under :
The agricultural land 507 bighas was shown in the return as against 607 bighas by your goodself. In this connection it is submitted that following land has been sold in the year 1969-70, the details are as under :
66 Bighas 16 Biswas - Shri Laxmi Narain Vijay 9 " 9 " - Shri Ghansyam Jugal Kishore 2 " 11 " - Shri Nanu Ram 7 " 19 " - Shri Dhool Singhji --------- ---------- 96 Bighas 15 Biswas The money was credited in the books of account of relevant years. Therefore, the above difference stands corrected and the land 507-bighas, shown by the assessee in the return is correct. (b) As regards Prahladpura land it is submitted that Maharao Sahib is having 52 bighas of land only. The 150 bighas of Prahladpura land belongs to Raj Kumari Indra Kumariji of Rajgarh and 150 bighas to Raj Kumari Bhuvaneshwari Kumariji. Therefore, 300 bighas of land does not belong to Maharao Sahib but to other family members. (c) There was 585 bighas 6 biswas of agricultural land belonging to Maharao Sahib-Out of this, 563 bighas of land has already been sold to various parties and does not belong to the assessee on the relevant valuation date.... (d) As regards Ladpura land out of 310 bighas, 304...is comprising in Umed Bhavan compound...agricultural land. Umed Bhavan is official residence of Ex...hence, it is exempt underSection 5(1)(iii) and...at length as above. (e) As regards Rampura land, the land in possession of assessee is 500 bighas 10 biswas and not 530...as shown by you. It seems there is some...and correct land is 500 bighas and 10 biswas...was included in the return. The necessary evidence of the above...available with the assessee is...We do hope your goodself would now be quite satisfied and will finalise the assessment and oblige.
22.2 On that very day, the assessee had addressed another letter dated 29-11-1977 to the WTO (at pages 68 and 69 of the paper book filed by the assessee) on the subject ‘regarding Wealth-tax cases of H.H. Maharao Bhim Singhji Sahib, Kota-Assessment year 1970-71 and onwards’ reading as under :
Submission of the point of agricultural land :
In continuation of our previous submission and details which we have furnished from time to time we further submit as under :
1. Your goodself has observed that why the agricultural land of Kherli Purohit 594 Bighas, Dastpura 559 Bighas and Khand Caunri 1050 Bighas was not shown in the return.
In this connection we would like to draw your kind attention to our letter dated 27-9-1977, in which we have submitted that these are not agricultural land. These lands comprises Umed Bhavan which is the official residence of ex-Ruler of Indian State Kota.
In this connection, as desired by your goodself as have filed the order of Government of Rajasthan No. FLG/17/Rev./A/65 dated 17-9-1966 according to which aforesaid lands are not agricultural land and are comprising in Umed Bhavan which is the personal property of Maharao Sir Bhim Singhji Sahib of Kota-Original order is ready for your kind perusal and verification.
The entire Umed Bhavan is declared as official residence of ex-Ruler which is exempt underSection 5(1)(iii) of the Wealth-tax Act, 1957 and this point has been discussed at length in the past and since then exemption is being allowed. Therefore, we hope your goodself would now be quite satisfied on this point.
22.3 The order of the Government of Rajasthan dated 17-9-1966 referred to in the above letter dated 29-11-1977 is at pages 21 and 22 of the paper book filed by the assessee. The said letter is addressed by the Additional Chief Secretary to the Government of Rajasthan, Jaipur, to the Collector, Distt. Kota and is in the following terms :
Sub : Personal property of His Highness the Maharaja of Kota.
Ref : Your letter No. Rev./KS/65-3739 dated 10-6-1965.
Sir.
I am directed to say that having regard to the definition of words ‘estate’ and ‘land’ as given in the Rajasthan Land Reforms and Acquisition of Land Owners Estate Act, 1965 ‘Umed Bhavan’ including gardens, rari, building, etc., comprising the entire compound entered in the inventory of the private property of His Highness, Kota, mentioned in the covenant, cannot be regarded as estate for the purposes of the aforesaid Act. Such a property cannot, therefore, be acquired. Eventually, the question of Compensation Commissioner giving answer or determining the status of such property also does not arise. It is not correct to say that Compensation Commissioner will have to declare as to whether a particular property is or is not specified as private property in the inventory. The land revenue was, therefore, incorrectly assessed on the land falling within the compound of Umed Bhavan, Kota. So far as the question of conversion of this land into ‘abadi’ land is concerned, it appears from the perusal of the record that this land should not have been classified as agricultural land. It would not be in the fitness of things to issue an order converting this land into ‘abadi’ land. The revenue record may, however, be corrected so that the correct nature of the land may be shown therein. You may now take necessary action in respect of correction of the record.
22.4 The paper, which I will like to mention next, is the letter No. Bl/IT/ Agrl. Land/77-78/15900 dated 3-1-1978 addressed by the ITO, to the IAC Ajmer Range, Ajmer (at pages 9-11 of the paper book filed by the revenue) on the subject regarding ‘A.G. Audit Note-Review of assessment of Agricultural lands for Wealth-tax, Gift-tax, etc. A-ward, Kota A.G.’s letter No. RAS-126/3344 dated 5-3-1975’, reading as under :
The case of H.H. Bhim Singh of Kota was examined.
Assessee had shown agricultural land measuring 1345.12 bighas whereas in the Tehsil records, it has been shown at 5017 1/2 bighas. As per the audit report the land has been shown at 4815.02 bighas. The consolidated chart with reasons is enclosed herewith. Assessee has given reasons for showing lesser agricultural land than recorded in Tehsil records. Some of the reasons are either certain lands have been sold or belong to other family members of the assessee.
Reconciliation of lands shown by the assessee and as shown in Tehsil records :
Tehsil records show the agricultural land at 5017 bighas out of which 3674 bighas have either been sold or given in Bhudan or belonging to N.K. Brijraj Singh, Princess Indra Devi, Princess Bhuwaneshwari Devi. The main chunk of lands measuring 2203 bighas is comprised in the official palace of His Highness, i.e., City Palace. They include the lands situated in Kherli Purohit, Dastpura, Khand Gaunri villages which are now nowhere. It was on this land the palace was built and the villages were removed. In this regard I may also submit that in Rampura village the assessee had shown 500 bighas whereas in Tehsil records it has been shown at 530 bighas. The balance would be 1343 which reconciles with the figures shown by the assessee. Details are given in Annexure ‘B’.
Reconciliation of land shown by the assessee and as per A.G. note :
A.G. Note has shown agricultural land of 4815 bighas. By reconciliation as per Annexure ‘C’ the A.G. Note shows excess land of 3468 bighas which if reconciled, the balance would come to, 1349 bighas. There is a difference of 2 bighas due to rounding off of figures.
Thus, in my opinion, there is no difference of land shown by the assessee.
23. Thereafter, the WTO completed the wealth-tax assessment orders of the assessee for the years under consideration, i.e., assessment years 1970-71 to 1976-77. These are dated 28-1-1978 (assessment years 1970-71 to 1974-75) and 31-3-1978 (assessment years 1975-76 and 1976-77). In the wealth-tax assessment order in the assessment year 1970-71, the WTO computed the net wealth of the assessee including, inter alia, the value of the immovable (a) urban assets ‘as value per last year’ minus the value of the immovable properties sold by the assessee in that year and (b) the agricultural land at Rs. 5,30,000. Thereafter, there is an observation by the WTO reading ‘Umed Bhavan land claimed not being agricultural land’. There is, however, no discussion in the said assessment order or any of the assessment orders for the other years under consideration regarding the aforsaid exemption claimed by the assessee in each of the years under consideration underSection 5(1)(iii) and brought out in paragraph 19 above. At the same time, the WTO has not included in the net wealth of the assessee in each of the years under consideration the market value of land attached to and surrounding Umed Bhavan Palace building.
24. Insofar as the other years under consideration are concerned, the WTO has computed the net wealth of the assessee in each of those years by including therein the market value of the immovable assets, namely, urban assets and the agricultural land ‘as per the value of the last year’ minus the value of each those said assets, if any, sold in that year (assessment orders are at pages 77 to 91 of the paper book filed by the assessee).
25. After those assessments for the years under consideration were completed by the WTO, the Commissioner issued show cause notices to the assessee on 27-12-1979 in respect of the assessment years 1970-71 to 1974-75 and on 4-3-1980 for the assessment years 1975-76 and 1976-77.
26. The extract from the show cause notice for the assessment year 1973-74 (at pages 98-100 of the paper book) is in the following words :
A perusal of records of proceedings was made. It is found that you owned 2507 bighas of land in the surroundings of Umed Rhavan at Kota. The value of aforesaid land was not declared in the wealth-tax return filed by you on 18-8-1983.
2. The assessment for the assessment year 1973-74 was made by the WTO on 28-1-1978. The value of the aforesaid property could not be brought to charge because of the failure on your part to declare the said asset in the return of wealth filed by you. You have, however, filed Annexure G2 along with the return. In the annexure, you haves hown the details of land comprising Umed Bhavan was sold to the two co-operative societies. In a note annexed to the said annexure, it is mentioned that the land comprising of Umed Bhavan compound was sold to the co-operative societies as per sale agreement dated 18-8-1972. These sale deeds were presented for registration to the Registrar of Kota on 20-8-1972 but the documents have not been released so far and unless the registration deeds are returned to the sellers, the deals are not final and, therefore, the amount is shown under protest. In any case, if the final registration could not be effected, the land would remain exempt underSection 5(1)(iii) of the Wealth-tax Act, as in the past. The WTO has neither included the cash receipt of Rs. 2,40,000 received by him towards the sale proceeds in your net wealth nor has discussed in the assessment order about the exemption of the said land. It reveals from the assessment record that the WTO has failed to make enquiries and to consider the question of exemption of the land. The failure on the part of the WTO is not examining the assessment records and to bring to charge the said property to tax is considered by me to be erroneous and prejudicial to the interests of the revenue.
27. The tenure of the show cause notice for the assessment years 1974-75 and 1975-76 (at pages 101-102 of the paper book) similar is in terms as the one for the assessment year 1973-74.
28. In respect of the assessment year 1976-77, however, the facts mentioned in the show cause notice were slightly different. The relevant extract reads as under :
A perusal of the records of proceedings was made. It is found that you owned 2507 bighas of land in the surroundings of Umed Bhavan at Kota. The value of the aforesaid land was not declared in the wealth-tax return filed by you on 30-9-1976.
2 The assessment for the assessment year 1976-77 was made by the WTO on 31-3-1978. The value of the aforesaid property could not be brought to charge because of failure on your part to declare the said asset in the return of wealth filed by you. You have, however, filed Annexure G-2 along with the return. In the annexure, you have shown the details of land comprising Umed Bhavan sold to the two co-operative societies. In the note annexed to the said annexure, it is mentioned that ‘the land comprising of Umed Bhavan compound was sold to the co-operative societies as per sale agreement dated 18-8-1972. These deeds were presented for registration to the Registrar of Kota on 18-8-1972 but the documents have not been released so far and unless the registration deeds are returned to the sellers, the deals are not final and, therefore, the amount is shown under the protest. In any case, if the final registration could not be effected, the land would remain exempt under Section 5(1)(iii) of the Wealth-tax Act, as in the past’. The WTO has neither included the cash receipt of Rs. 4,58,000 received by you towards the sale poceeds in your net wealth nor has discussed in the assessment order about the exemption of the said land. It reveals from the assessment records that the WTO has failed to make enquiries and to consider the question of exemption of the land. The failure on the part of the WTO in not examining the assessment records and to bring to charge the said property to tax is considered by me to be erroneous and prejudicial to the interests of the revenue.
29. The assessee, in the reply dated 14-1-1980 (at ‘C in the paper book filed by the assessee) to the show cause notice issued by the Commissioner for the assessment years 1970-71 to 1974-75, inter alia, raised the following points against the proposed action of the Commissioner under Section 25(2) :
1. That the assessee had declared in Part IV of the return full facts regarding Umed Bhavan compound and palace and claimed exemption therefor under Section 5(1)(iii) of the Wealth-tax Act, 1957.
2. That the matter of exemption of entire Umed Bhavan including compound was discussed by the WTO for the first time in the assessment year 1957-58 and after due consideration, the assessee’s claim for exemption to entire Umed Bhavan including compound was conceded to.
3. That the WTO has made due enquiries with regard to the land surrounding Umed Bhavan in the course of assessment proceedings for the assessment years 1970-71 to 1976-77 which were finalised more or less simultaneously ; those for the assessment years 1970-71 to 1974-75 having been finalised on 28-1-1978 and those for the assessment years 1975-76 and 1976-77 having been finalised on 31-3-1978.
4. That the queries of the WTO were duly replied by the assessee vide his letters dated 27-9-1977 and 29-11-1977 and the matter was discussed at length and his attention was also drawn to the proceedings for the assessment year 1957-58 to the assessment year 1965-66 in the course of which the question of exemption underSection 5(1)(iii) of Umed Bhavan and the adjoining lands forming part of its compound was dealt with in great detail and then exemption was granted to the assessee under Section 5(1)070 of the Wealth-tax Act, 1957.
5. That, therefore, it was not correct to say that there was any failure on the part of the WTO to examine the issue in question and form his opinion about it. He had verified all the facts and had examined all the facts and had also gone through the past records and, therefore, the order passed by the WTO was not at all erroneous and prejudicial to the interests of the revenue.
6. That in the past the revenue had all along accepted that Umed Bhavan including rari and entire compound was entitled to exemption underSection 5(1)(iii) of the Wealth-tax Act, 1957 and that, there was no basis for upsetting that finding. The WTO had given exemption to the assessee only after he had been fully satisfied with the explanation of the assessee.
7. That, therefore, it was not warranted to re-open the settled issue under the provisions of Section 25(2) of the Wealth-tax Act, 1957 and that as such ‘your honour would not have jurisdiction in this matter’.
30. On merits, the assessee reiterated the same submissions, as he had made earlier in the course of assessment proceedings for the assessment year 1957-58, which have been extracted by me in extenso above in para 8 supra and need not, therefore, be reproduced at this stage. Towards the end, the assessee’s submission was summarised in the following words :
That it is needless to mention that entire Umed Bhavan including land, garden, rari, etc., etc., is within one compound wall and no part of it is separated elsewhere from the on compound wall. The entire Umed Bhavan is one building and no part of it on map of Umed Bhavan which includes all land, rari, garden, etc., etc., has been comprised which was duly approved by the Government of India, as one building. Therefore, due to this fact, the entire palace including land, etc., etc., was notified as ‘Umed Bhavan’ being palace of official residence of ex-ruler.
In the light of these facts and circumstances that the entire Umed Bhavan including rari, garden and entire compound which is within one compound wall which has been approved by the Government of India and notified in the Gazette as official residence of ex-ruler is exempt from purview of wealth-tax under Section 5(1)(iv) of the Wealth-tax Act, 1957, Therefore, the entire 2507 bighas as mentioned by your goodself is within the compound wall of Umed Bhavan and comprises official residence and is also exempt.
31. According to the learned Accountant Member, vide paragraphs 25.3 and 25.4 of his order, the assessee had enclosed with the aforesaid replied two letters from ex-rulers of Bikaner and Jaipur. These are dated 13-2-1969 and 8-3-1969 (at pages 11 and 20 of the paper book filed by the assessee), respectively. In the said reply, the assessee also invoked the principles of res judicata with regard to the aforesaid matter and submitted in this behalf as follows :
That is beyond doubt that question of exemption of entire Umed Bhavan including land has been decided in the assessment year 1967-68 and there is no change in the nature of property, then law of res judicata applies in above assessment years also. There is no change in the property. The property continues to be the same in all these years and as such the law of res judicata applies in this case and exemption continued to be allowed.
32. The reply of the assessee dated 14-3-1980 to the show-cause notices issued by the Commissioner underSection 25(2) for the assessment years 1975-76 and 1976-77 is at pages 107 to 115 of the paper book filed by the assessee, as rightly stated by the learned Accountant Member in para 25.5. The submissions made therein by the assessee were similar to the ones made in reply to the show-cause notices in the assessment years 1970-71 to 1974-75.
33. The Commissioner after hearing the representative for the assessee and considering the replies filed by the assessee to the show-cause notices issued for the assessment years 1970-71 to 1974-75 passed a consolidated order dated 21-1-1980 to the following effect :
Facts of the case and arguments made challenging the validity of action underSection 25(2) on behalf of the assessee are more or less the same as have been discussed in detail in my order dated 23-8-1979 passed underSection 25(2) of the Wealth-tax Act in this very case for the assessment years 1966-67 to 1969-70 whereby I have set aside the said assessment orders to be made de novo. I need not repeat the contentions raised by the assessee and my observations thereon. For the same reasons as have been elaborately discussed by me in the aforesaid order dated 23-8-1979 and the facts discussed above I set aside the assessments for the assessment years 1970-71 to 1974-75 also to be made de novo. The WTO is directed to value the vast open land measuring 2507 bighas in surroundings of Umed Bhavan, Kota after giving proper opportunity to the assessee according to law and include the same in the net wealth of the assessee in the assessment years 1970-71 to 1974-75.
34. Similarly, the Commissioner, after hearing the representative of the assessee and considering the reply of the assessee the show cause notices passed a consolidated order for the assessment years 1975-76 and 1976-77 underSection 25(2) dated 19-3-1980 by observing as under ;
Facts of the case and arguments made challenging the validity of action underSection 25(2) on behalf of the assessee are more or less the same as have been discussed in detail in my order dated 23-8-1979 passed underSection 25(2) of the Wealth-tax Act in this very case for the assessment years 1966-67 to 1969-70 whereby I have set aside the said assessment orders to be made de novo. I need not repeat the contentions raised by the assessee and my observations thereon. For the same reasons as have been elaborately discussed by me in the aforesaid order dated 23-8-1979 and the facts discussed above I set aside the assessments for the assessment years 1975-76 and 1976-77 also to be made de novo. The WTO is directed to value the vast open land measuring 2507 bighas in surrounding of Umed Bhavan Kota after giving proper opportunity to the assessee according to law and include the same in the net wealth of the assessee in the assessment years 1975-76 and 1976-77.
35. The assessee then brought the appeals before the Tribunal, as already stated, the learned Accountant Member and the learned Judicial Member hearing these appeals have differed. It may be mentioned that the arguments advanced by the parties have been brought out in detail by the learned Accountant Member in his order. The sum and substance of the stand taken by the learned Accountant Member and the learned Judicial Member in this case have been summarised in paragraphs 4 and 5 above.
36. When the matter came up for hearing before me as a Third Member, the learned counsel for the assessee, Mr. C.S. Agarwal, has raised a preliminary objection. The same has been brought out in details in para 8 above. The said preliminary objection, according to the departmental representative, was without substance. This aspect of the case has been discussed by me in para 9 above. Therein, the preliminary objection of the learned counsel for the assessee, Mr. C.S. Agarwal, has been for the reasons stated therein, not accepted.
37. The first point made out by the learned counsel, Mr. C.S. Agarwal thereafter was that the approach of the learned Judicial Member in his order was not correct, inasmuch as, there was no difference of opinion between the learned Members hearing the appeals in the matter of facts. In this connection, the learned counsel, Mr. C.S. Agarwal, took me through the order of the learned Accountant Member touching the facts of the case. He then took me through para 3 of the order of the learned Judicial Member wherein he has observed that ‘the facts have by and large been properly incorporated in the impugned order and more fully by my learned brother’. Thereafter, the learned Judicial Member referred to the aforesaid consolidated order of the Commissioner dated 21-1-1980 for the assessment years 1970-71 to 1974-75 and the consolidated order dated 19-3-1980 for the assessment years 1975-76 and 1976-77 underSection 25(2). The second point made out by the learned counsel, Mr. C.S. Agarwal, is that the approach of the learned Judicial Member in his order is not correct because, according to him, the learned Judicial Member has not advanced any reasons for taking a view contrary to the view taken by the learned Accountant Member. The order of the learned Judicial Member, according to the learned counsel for the assessee, Mr. C.S. Agarwal, is not a speaking order and so is not an order valid in the eyes of law.
38. The learned counsel for the assessee, Mr. C.S. Agarwal, next argued that since the learned Judicial Member has decided the appeals by following the earlier order of the Tribunal (Jaipur Bench, Jaipur) in WT Appeal Nos. 347 to 350 (Jp.) of 1979 for the assessment years 1966-67 to 1969-70, this approach of his was not correct in law because the learned Accountant Member in his order has discussed in detail as to why the matter required to be examined afresh in the light of the additional evidence brought on record in the course of the assessment of the assessee for the years under consideration. The additional evidence so brought on record, as discussed in para 37.5 of the order of the learned Accountant Member, was not considered either by the Commissioner in his impugned orders under Section 25(2) nor by the learned Judicial Member. Further, the earlier order of the Tribunal relied upon by the learned Judicial Member was rendered without considering this additional evidence (brought on records of the assessee for the years under consideration).
39. The learned counsel for the assessee, Mr. C.S. Agarwal, next addressed me on the question as to whether the Commissioner had correctly assumed the jurisdiction underSection 25(2). According to the learned counsel, Mr. C.S. Agarwal, the Commissioner had attempted to assume jurisdiction under Section 25(2) primarily on the grounds that the assessee did not declare in the wealth-tax returns the value of the land admeasuring 2507 bighas in the surrounding of Umed Bhavan, Kota ; that even though the assessee had in his letter dated 25-9-1977 (pertaining to the assessment year 1970-71) and 29-11-1977 (pertaining to the assessment years 1970-71 and onwards) had claimed exemption underSection 5(1)(iii) in respect of Umed Bhavan/Umed Bhavan including the compound, the WTO ought to have made enquiries whether the land surrounding Umed Bhavan Palace building was, in fact, exempt underSection 5(1)(iii) and discussed the claim regarding the said exemption in the assessment orders that although no such land was shown as exempt in Part IV of the return yet in annexure thereto a note was given mentioning the sale of diverse portions of the said land, the receipt of the diverse amount of sale consideration ; the WTO while completing the assessments for those years neither included the said sale consideration in the net wealth of the assessee for the year concerned nor discussed in the assessment order’s the claim of the assessee for exemption underSection 5(1)(iii). He, in fact, according to the Commissioner, did not make an enquiry on this point and consider the claim of exemption at all. The said assumed jurisdiction, according to the learned counsel for the assessee, Mr. C.S. Agarwal, as rightly pointed out by the Accountant Member in paras 34.2, 34.3, 34.4, 34.5, 34.6 and 34.7 and also 35.1, 35.2, 35.3, 35.4 and 35.5 and 36, was not validly assumed by the Commissioner underSection 25(2). The reasons given by him to assume jurisdiction, as brought above, could not be sustained. Since I will be dealing in detail with the points made out by the learned Accountant Member, the subsequent part of my order, I need not detail those reasons at this stage.
40. The learned counsel, Mr. Agarwal, next took me through the provisions of Section 5(1)(iii) and urged that from the plain reading of the said provision, as rightly held by the learned Accountant Member in paras 37.2 and 37.3 of his order, it was clear that what was exempt under that provision was building in the occupation of the ruler which was his ‘official residence’ by virtue of the declaration by the Government under paragraph 15 of the Part B States (Taxation Concessions) Order. Under the aforesaid paragraph 15(1)(iii), the bonafide value of the palaces of rulers of Indian States, which was declared by the Government as the official residences of such rulers, was not to be included in the ex-ruler’s total income. Since the Umed Bhavan Palace was, in the case of the assessee, one of the palaces which was declared by the Government as his official residence under the said order and the said palace was in the occupation of the assessee. The entire Umed Bhavan Palace including the land surrounding it was exempt underSection 5(1)(iii). This was also clear from the letter of Mr. V. Vishwanathan dated 20-1-1958 referred to in para 11 above and the reply of the assessee dated 23-1-1958 referred to in para 12 above. The exemption available to the assessee underSection 5(1)(iii) was confined, as is clear from the provisions of Section 5(1)(iii), not only in respect of one superstructure but also in respect of other superstructures in Umed Bhavan Palace. If that is so, there is nothing in that provision to hold that only the land appurtenant to those buildings would qualify for exemption underSection 5(1)(iii). The Palace which was exempt underSection 5(1)(iii) in the case of the assessee, namely, Umed Bhavan Palace was the entire Palace, namely, superstructures in Umed Bhavan and the entire land surrounding those superstructures because the superstructures along with the land surrounding it constituted nothing but Umed Bhavan Palace. The land surrounding the Umed Bhavan Palace building constituted nothing but the compound of the Umed Bhavan Palace and so an integral part of the palace. It would be arbitrary to argue the learned counsel for the assessee, Mr. Agarwal, next urged that only small area which was appurtenant to the superstructures in Umed Bhavan along with those superstructures would alone constitute the Umed Bhavan Palace which was exempt underSection 5(1)(iii). The entire Umed Bhavan Palace including the land surrounding it has since been held to be exempt underSection 5(1)(iii) in the case of the assessee in his wealth-tax assessments from the assessment year 1957-58 and onwards.
41. The learned counsel for the assessee, Mr. C.S. Agarwal, next urged that in the light of the additional evidence now brought on record and detailed by the learned Accountant Member in paragraph 37.5 of the order of the learned Accountant Member, the earlier order of the Tribunal relied upon by the learned Judicial Member in his order cannot hold the field. The said additional evidence was never there either before the Commissioner when he passed the order underSection 25(2) for the assessment years 1966-67 to 1969-70, nor before the Tribunal. The learned counsel for the assessee, Mr. C.S. Agarwal, next urged that the assessment orders for the years under consideration were passed by the WTO after due application of mind. These assessments were completed after due enquiry. The present case is not a case of an assessment completed without any enquiry as was in the assessment years 1966-67 to 1969-70. These assessments were made by the WTO after full and complete disclosure was made by the assessee in the wealth-tax returns for the years under consideration. The WTO, while making the assessments, applied his mind to the disclosure made and came to a conclusion that the assessee was entitled to the exemption, regarding the land surrounding the Umed Bhavan Palace building underSection 5(1)(iii). The said view taken by the WTO is in consonance with the assessments made in the case of other ex-rulers of Bikaner and Jaipur. The sum and substance of the thrust of the arguments by the learned counsel, Mr. C.S. Agarwal, was that the view taken by the learned Accountant Member is the correct view and the view taken by the learned Judicial Member should be ignored by me.
42. In reply, the departmental representative urged that the order of the learned Judicial Member is a speaking order as is clear from para 5 of his order. A perusal of para 5 of the order of the learned Judicial Member makes it abundantly clear that according to him, the facts of the case in the year under consideration were similar to those which were before the Jaipur Bench of the Tribunal in the case of the assessee for the assessment years 1966-67 to 1969-70 and so the said earlier decision in WT Appeal Nos. 347 to 350 (Jp.) of 1979 (supra), when all the contentions raised before the Bench appear to have been raised earlier and the same have been discussed therein, should prevaile. No convincing reasons stand advanced on behalf of the assessee as to why the Tribunal should not follow its said earlier order.
43. The departmental representative further urged that the factual position being as stated by the learned Judicial Member, the learned Accountant Member, while deciding these appeals should have, in view of the ratio of the said decision, followed and not differed from the aforesaid earlier order of the Tribunal in the case of the assessee for the assessment years 1966-67 to 1969-70.
44. The departmental representative then addressed me on the correctness of the so called additional evidence which was stated to be on the record of the wealth-tax proceedings for the years under consideration. His observations in this behalf are as under :
1. Re.: the letter of the WTO dated 8-1-1969 at page 1 of the paper book filed by the revenue addressed by him to the Tehsildar, Kota in the file of the assessee for the assessment year 1957-58, it was argued that the sale did not represent any new or additional evidence as sought to be made out. The same did not form part of the records of the years under consideration but of the assessment year 1957-58 ;
2. The stand taken by the departmental representative at (1) above was also reiterated and canvassed regarding the letter of the Tehsildar No. 55 dated 23-1-1969 at page 2 of the paper book filed by the Revenue addressed to the WTO in reply to the aforesaid letter of the WTO ;
3. The stand as taken hereinbefore in (1) & (2) was also reiterated by the departmental representative regarding the letter of the WTO No. B-1/WT/KU/2062 dated 1-2-1969 addressed to the assessee and the map of the Palace which was shown by the assessee to the WTO on 17-3-1969 in the course of the assessment proceedings for the assessment year 1957-58. The said letter and the map were according to the departmental representative never produced and shown by the assessee to the WTO in the course of the assessment proceedings nor were those documents considered by him (the WTO) while making the assessments of the assessee for the assessment years 1970-71 to 1976-77.
45. The departmental representative next drew my attention to para 13 of the order of the Commissioner underSection 25(2) for the assessment years 1966-67 to 1969-70 wherein he considered the stand of the assessee over there that there was no change about the property in those years as compared to the one in the assessment year 1957-58 when the decision was taken by the WTO (for that year) that Umed Bhavan including the entire open land was exempt underSection 5(1)(iii). The WTO in view of the principle of res judicata or estoppel, was bound to follow the findings of the WTO in the assessment year 1957-58 in all the subsequent assessment years. The Commissioner had disagreed with the said contentions of the assessee as, according to him, a finding or decision given by an officer in one year can be departed from in a subsequent year and the WTO was not bound by the principle of estoppel or res judicata, more so when the WTO, according to the Commissioner, should have examined the records of the proceedings for the wealth-tax assessment year 1957-58 and ought to have posed the issue to himself for considering the question, as to the extent of exemption available to the assessee under Section 5(1)(iii) in respect of the Umed Bhavan Palace. The failure on the part of the WTO to investigate into various aspects involved in the said issue proves that the WTO had not applied his mind to the said question. The same, according to the departmental representative, squarely applied to the assessments made by the WTO for the years under consideration. The WTO in these assessments, when the assessee had not claimed exemption of the entire lands surrounding the Umed Bhavan Palace but had sought exemption only of the Umed Bhavan/Umed Bhavan including the compound in the returns for the years under consideration, ought to have gone into the question whether the land surrounding the Umed Bhavan Palace building would qualify for exemption underSection 5(1)(iii). That was not done. The present case is, thus, a case of no enquiry.
46. Insofar as the extract of the Accountant General’s Audit Note dated 5-3-1976, referred to in para 20 above, the letter of the ITO, dated 24-10-1976, referred to in para 22 above, the reply of the assessee dated 29-11-1977 to the letter of the ITO dated 24-10-1977 referred to in para 22.1 above and the report of the ITO to the IAC dated 3-1-1979 referred to in para 22.4 above relied upon by the learned Accountant Member are concerned, the departmental representative had argued that a perusal of these papers will show that the question involved for consideration in those papers was limited to the extent of agricultural land held by the assessee in the assessment year 1970-71 and onwards. These papers did not primarily raise the question of exemption underSection 5(1)(iii) in resp2ct of the land surrounding the Umed Bhavan Palace building. These papers had nothing to do with the exemption available to the assessee underSection 5(1)(iii) in respect of the land surrounding the Umed Bhavan Palace building and the extent of the said exemption. The enquiry, as is clear from the said papers, pertained to the extent of the agricultural land holding with the assessee in the assessment year 1970-71 and onwards. In this connection also, the departmental representative drew my attention to the assessment order of the assessee for the assessment year 1970-71, wherein the WTO has expressly brought out (at page 78 of the paper book filed by the assessee) as to the extent of agricultural land owned by him. He had accepted there that the Umed Bhavan land was not agricultural land meaning thereby that it was abadi land as claimed by the assessee.
47. Insofar as the letter of the Additional Chief Secretary to the District Collector, Kota dated 17-9-1976 referred to in para 23.3 above and the order of the District Collector, dated 16-9-1976 requisitioning the compound of Umed Bhavan at pages 1 and 2 of the 3rd paper book filed by the assessee relied upon by the learned Accountant Member in para 37.5 of his order are concerned, they do not, according to the departmental representative, represent any additional evidence forming part of the record of the assessments of the assessee for the years under consideration. Nor are they relevant for the purpose of enquiry for exemption underSection 5(1)(iii). In the first letter, the point decided by the Government of Rajasthan was as to whether Umed Bhavan including garden, rari, building, etc., comprising the entire compound, entered into the inventory of the private property of the assessee mentioned in the covenant entered into between the Government of India and the assessee, could be treated as an ‘Estate’, the expression as defined in the Rajasthan Land Reforms and Acquisition of Land Owners Estate Act. That decision was in the context of that enactment and the same has no relevance for deciding the question as to whether the lands surrounding Umed Bhavan Palace building is exempt underSection 5(1)(iii) or not. Notification regarding the acquisition of a part of the compound of Umed Bhavan Palace underSection 23(1) of the Defence and Internal Security of India, 1971, has no relevance for the enquiry in the present case pertaining to the exemption available to the assessee, if any, underSection 5(1)0′”) pertaining to the land surrounding Umed Bhavan Palace.
48. Insofar as the letters of the assessee to the WTO dated 27-9-1977 and 29-11-1977 referred to above in para 22.1 and 22.2, respectively, i.e., exemption underSection 5(1)070 relied upon by the learned Accountant Member in para 37.5 of his order are concerned, these were, according to the departmental representative, never considered by the WTO as there is no discussion in the assessment orders for the years under consideration regarding the exemption underSection 5(1)(iii) referred to therein. The observations made by the Commissioner in para 13 of his consolidated order underSection 25(2) for the assessment years 1966-67 to 1969-70 referred to in para 46 above squarely apply to these letters also. Present case is a case of ‘no enquiry’ made by the WTO regarding the exemption claimed therein underSection 5(1)(iii)- Further, the point which is mainly highlighted therein is that the land surrounding Umed Bhavan Palace building was abadi land and not agricultural land. The exemption claimed was for Umed Bhavan/Umed Bhavan including compound and not the land surrounding it in the returns for the years under consideration.
49. The departmental representative further urged that in the Audit Note of the Accountant General, Rajasthan, there was no reference to Umed Bhavan Palace. The said Audit Note only pointed out the difference between the extent of the agricultural land actually held by the assessee and the agricultural land disclosed by him in his assessments from the assessment years 1965-66 and onwards.
50. The departmental representative, in view of what has been stated therein before has, therefore, urged that the learned Accountant Member has erred in concluding that in the years under consideration there was any such additional evidence which was not before the Commissioner and/or the Tribunal when they disposed of the assessments of the assessee for the assessment years 1966-67 to 1969-70. As such, the question as to whether the so-called additional evidence was considered by the Tribunal in its aforesaid earlier order for the assessment years 1966-67 to 1969-70 is of no consequence. The so-called additional evidence brought out by the learned Accountant Member in para 37.5 was never examined by the WTO nor did he apply his mind to the same or any one of them, while making the assessments for the years under consideration except that in the assessment year 1970-71, he has held that the lands surrounding Umed Bhavan Palace was not agricultural land.
51. The departmental representative next took me through the returns of the assessee for the years under consideration. Insofar as the assessment year 1970-71 is concerned, it was pointed out that in the returns for that year, the assessee had neither claimed either in Part IV or in the annexures to the return the exemption underSection 5(1)(iii) in respect of Umed Bhavan Palace building or the land surrounding it. In regard to the returns for the assessment years 1971-72 to 1976-77, the departmental representative highlighted the fact that the exemption claimed therein is in respect of Umed Bhavan/Umed Bhavan including compound and not also for the land surrounding Umed Bhavan Palace building admeasuring 2507 bighas. Further, there was no disclosure in the said returns or the annexures thereto as to the extent of the compound of the Umed Bhavan and/or the Umed Bhavan Palace. The WTO in the assessment orders for the years under consideration never made any enquiry by collecting material regarding the extent of exemption, if any, available to the assessee underSection 5(1)(iii) in respect of the land surrounding the Umed Bhavan Palace building nor did he ever examine the question pertaining to the exemption, if any, available to the assessee in respect of the said ‘surrounding land’. The WTO never applied his mind to the exemption, if any, available to the assessee in respect of the land surrounding the superstructure of the Umed Bhavan Palace. As such, the assessment orders passed by the WTO for the years under consideration were erroneous insofar as being prejudicial to the interests of the revenue, in view of the ratio of the decision of the Supreme Court in Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323.
52. The departmental representative next challenged the correctness of the observations by the learned Accountant Member in his order holding that the Commissioner had not validly assumed the jurisdiction underSection 25(2). According to him, the approach of the learned Accountant Member in this behalf is not correct. The learned Accountant Member for coming to the above conclusion, according to the departmental representative, in paragraphs 34.2, 34.3, 34.4, 34.5, 34.6, 34.7, 35.1, 35.2, 35.3, 35.4 and 35.5 has relied on the facts and circumstances and/or the evidence which was either not before the WTO and/or was irrelevant in the context of the question involved. The conclusion drawn by the learned Accountant Member in paragraph 36 was, according to the departmental representative, not correct. The conclusion by the learned Accountant Member in the above paragraphs are either misplaced or not correct or not justified. The facts in the years under consideration are almost similar to those which were there in the assessment years 1966-67 to 1969-70 and as such, the decision of the Tribunal for those years in the matter of valid assumption of jurisdiction by the Commissioner underSection 25(2) squarely applies to all the years under consideration.
53. The departmental representative next took me through the various paragraphs of the order of the learned Accountant Member. Insofar as the reference to the inventory of the private property approved by the Government of India in the case of the assessee referred to in para 10 above is concerned, the same, according to the departmental representative is of no consequence, more so when the palaces which were notified as the official residence of the assessee, the then ruler of Kota, issued on 14-5-1954, inter alia, included Umed Bhavan. The relevant entry in the inventory of private property of the assessee referred to in paragraph 10 above, however, read ‘Umed Bhavan including gardens, rari, building, etc., comprising the entire compound’. Further, according to the departmental representative, the covenant entered into between the Government of India and the assessee on compassing the inventory of private property of the assessee was nothing but merger agreement and not law as laid down in CIT v. Nawab of Rampur [1966] 62 ITR 1 (All.) (FB) and in H.H. Maharaja Vibhuti Narain Singh v. CWT[1970] 78 ITR 714 (All.). The departmental representative further urged that there was no promissory estoppel against law, as laid down by the Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. [1979] 118 ITR 326. Further, the aforesaid notification dated 15-4-1954 referred to in para 10.1 above will prevail against the relevant entry of the private property of the assessee referred to in para 10 above.
54. The departmental representative, insofar as the letters issued by the ex-rulers of Bikaner and Jaipur in 1969 are concerned, has argued that these letters have no force in the eye of law because they merely express therein the opinion of the ex-ruler concerned regarding the exemption available underSection 5(1)(iii) for the compound attached to the palace owned by him, more so when they do not mention the extent of compound. These letters do not constitute ‘evidence’ but merely record their opinion.
55. The departmental representative relied on the earlier order of the Tribunal in the case of the assessee referred to in para 3 above for the assessment years 1966-67 to 1969-70 as also various observations and findings therein. According to him, that decision represented the correct view in the matter and the observations of the learned Accountant Member to the contrary are not correct.
56. Insofar as paras 5 to 9 of the order of the learned Accountant Member is concerned, the same, according to the departmental representative, discusses the assessment of the assessee for the assessment year 1957-58. The records of the assessment of the assessee for that year were never looked into by the WTO while making assessments for the years under consideration. The Commissioner in his earlier order underSection 25(2) for the assessment years 1966-67 to 1969-70, vide para 13, has squarely dealt with the said assessment of the assessee for the said assessment year 1957-58.
57. Coming to para 10 of the order of the learned Accountant Member, the departmental representative stated that the same deals with the assessments of the assessee up to the assessment year 1964-65 which has no relevance to the assessments of the assessee for the years under consideration, more so when in the assessment orders for the years under consideration (at pages 77-91 of the paper book filed by the assessee) there is no reference to those assessments nor was there any reference therein pertaining to the exemption claimed by the assessee under Section 5(1)(iii) or the extent of the exemption available to the assessee regarding Umed Bhavan Palace building and/or compound thereof. As such, according to the departmental representative, there was no application of mind by the WTO in that behalf. He never undertook the exercise, which was required to be done by him, to decide the assessee’s claim for exemption. As such, the assessment orders were erroneous insofar as prejudicial to the interests of the revenue. The departmental representative next compared para 10 with para 11 of the order of the learned Accountant Member and brought out the non-application of mind by the WTO, while making the assessments for the years up to 1969-70 in the matter of exemption available to the assessee and the extent of exemption available under Section 5(1)(iii) regarding Umed Bhavan Palace building and/or the land surrounding it.
58. The departmental representative then took me through paras 12 to 18 of the order of the learned Accountant Member and urged that the matter discussed therein pertaining to the Audit Note of the Accountant General, Rajasthan, referred to in para 20. It has no relevance to the claim of exemption under Section 5(1)(iii) made by the assessee which was never examined. Similar observations were made by the departmental representative regarding the observations of the learned Accountant Member in paras 19 to 21 of the order of the learned Accountant Member.
59. Insofar as paras 22 and 23 of the order of the learned Accountant Member are concerned, the departmental representative has urged that the correspondence between the Commissioner and the ITO pertaining to the audit objection is not relevant in the present case, more so, when the same has not been referred to by the Commissioner of Wealth-tax in the impugned orders under Section 25(2) for the assessment years 1970-71 to 1976-77.
60. The departmental representative next urged that insofar as para 24, 25 and 26 are concerned, he has nothing to say as they bring out the contents of the show-cause notices issued by the Commissioner under Section 25(2), the replies of the assessee thereto and the extract of the orders passed by the Commissioner under Section 25(2) for the years under consideration.
61. Coming to para 27 of the order of the learned Accountant Member, the departmental representative has urged that they only bring out the proceedings in the course of hearing of the appeals by the learned Accountant Member and the learned Judicial Member as also the arguments of the assessee and the departmental representative advanced before the Tribunal.
62. According to the departmental representative, para 28 of the order of the learned Accountant Member records the arguments advanced by the learned counsel for the assessee. So is the position regarding para 29 of the said order of the learned Accountant Member. Para 30 of the order of the learned Accountant Member, according to the departmental representative, records the arguments of the departmental representative advanced before the learned Accountant Member and the learned Judicial Member.
63. The departmental representative next took me through para 31 of the order of the learned Accountant Member which brings out the total area of the Umed Bhavan Palace building and the land surrounding it. The total area, according to the learned Accountant Member, came to 2428 bighas and 15 biswas and not 2507 bighas or anything higher than that.
64. The departmental representative after reading para 32 of the order of the learned Accountant Member stated that the same bring out the conclusion of the learned Accountant Member in respect of the preliminary point made by the departmental representative, namely, that the issue before the Tribunal stood concluded by the aforesaid earlier order of the Tribunal in the case of the assessee for the assessment years 1966-67 to 1969-70. For deciding the preliminary objections, the learned Accountant Member went through the decisions relied upon before the Tribunal in H.A. Shah & Co. v. CIT [1956] 30 ITR 618 (Bom.) and CIT v. L.G. Ramamurthi [1977] 110 ITR 453 (Mad.) and CIT v. S. Devaraj [1969] 73 ITR 1 (Mad.) as also the decisions of the Supreme Court in the case of Brijlal Lohia and Mahabir Prasad Khemka, (supra). After going through the ratio decidendi of these decisions, the learned Accountant Member has laid down the principle which emerged from the review of the aforesaid decisions, namely, that if the facts remain identical and no additional evidence is placed on record in a subsequent year, the Tribunal should not depart from the decision given by it on the same subject and on the same evidence. If, however, additional evidence was placed on record in the subsequent proceedings, the Tribunal was duty bound to take note of the said additional evidence and to decide the matter in accordance with law, keeping in view the additional evidence brought on record uninhibited by its earlier order. The departmental representative urged that there cannot be any quarrel with the said legal propositions.
65. The departmental representative next took me through paragraphs 33, 34, 35, 36 and 37 which, according to him, record the conclusion of the learned Accountant Member, namely, that the Commissioner had not validly assumed jurisdiction in the case of the assessee in the years under consideration under Section 25(2) ; that in the years under consideration, there was additional evidence on record as brought out in para 37.5 and that on merits, the entire Umed Bhavan Palace including the land surrounding it was exempt under Section 5(1)(iii). These conclusions of the learned Accountant Member, according to the departmental representative, as stated earlier, were not correct. The same stand has been taken by the departmental representative regarding the conclusions recorded by the learned Accountant Member in paras 38 and 39 of his order. According to the departmental representative, the assumptions made by the learned Accountant Member in the matter of additional evidence was not correct, nor was such additional evidence, if any, relevant for the issues involved before the Tribunal. The earlier decision of the Tribunal referred to above for the assessment years 1966-67 to 1969-70 in the case of the assessee was correct and had full application to the case of the assessee for the years under consideration.
66. In reply, the learned counsel for the assessee, Mr. C.S. Agarwal, has urged that the departmental representative was not correct in arguing that the order of the learned Judicial Member was a speaking order. The mistake, if any, in the earlier order of the Tribunal should not be perpetuated, when there is additional evidence on record, as brought out by the learned Accountant Member in para 37.5 of his order. The question of proprietary does not arise in the present case. The assessee had made full and complete disclosure before the WTO regarding the exemption claimed. Since the claim for exemption was made and/or considered by the WTO, it is to be taken, even though there is no discussion in the assessment orders, that the claim made was considered and allowed, more so when no addition in respect of the market value of the property involved, namely the lands surrounding superstructure of the Umed Bhavan Palace was added to the net wealth of the assessee for each of the years under consideration. The Commissioner, according to the learned counsel, as rightly held by the learned Accountant Member, has not validly assumed jurisdiction under Section 25(2). The issue regarding the exemption was examined by the WTO and allowed. There was no material before the Commissioner to issue notices under Section 25(2). Ipsi-Dixy the Commissioner, could not do that. In this connection, the learned counsel for the assessee, Mr. Agarwal, relied on the ratio of the decision of the Calcutta High Court in Dunlop Rubber Co. Ltd. v. ITO [1971] 79 ITR 349, at pages 359 to 361.
67. Mr. C.S. Agarwal, the learned counsel for the assessee, next adopted the stand of the learned Accountant Member, as brought in para 37.5, that there was additional evidence for the years under consideration which was not there earlier for the assessment years 1966-67 to 1969-70 and so the earlier decision of the Tribunal for the assessment years 1966-67 to 1969-70 did not operate as res judicata.
68. On merits, according to the learned counsel, Mr. C.S. Agarwal, the exemption under Section 5(1)(iii) embraced not only the superstructures of the palace but also the compound of the palace, which embraced the entire land surrounding the Umed bhavan Palace building. The expression ‘building’ in Section 5(1)(iii) was synonymous with the ‘Palace’.
69. Mr. Agarwal further urged that the scope of the order of the Commissioner for the years under consideration under Section 25(2) has been enlarged by the departmental representative in the course of his argument. The same could not be done in law. There was non-application of mind by the Commissioner. The Commissioner could not ask the WTO to determine the land appurtenant to the superstructures of Umed Bhavan Palace when the additional facts brought out by the assessee in replies to the show-cause notice were not discussed by the Commissioner in the impugned orders. In this connection, he referred to the decision of the Punjab & Haryana High Court in CIT v. R.K. Metal Works [1978] 112 ITR 445.
70. Mr. C.S. Agarwal, the learned counsel for the assessee, once again took me through paras 1 to 39 of the order of the learned Accountant Member and urged that the order was complete, correct and in accordance with law.
71. I have given consideration to the above arguments. I have also very minutely and diligently gone through the orders of the learned Accountant Member and the learned Judicial Member. Section 5(1)(iii) as it stood on each of the valuation dates for the assessment years 1970-71 and 1971-72 is in the following terms :
(1) Wealth-tax shall not be payable by an assessee in respect of the following assets and such assets shall not be included in the net wealth of the assessee-
** ** **
(iii) any one building in the occupation of a Ruler declared by the Central Government as his official residence under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950;
The said provision on each of the valuation dates for the assessment years 1972-73 to 1975-76, by virtue of the Finance Act, 1970, the Rulers of Indian States (Abolition of Privileges) Act, 1972, came to read as under :
5(1) Subject to the provisions of Section (1 A), wealth-tax shall not be payable by an assessee in respect of the following assets and such assets shall not be included in the net wealth of the assessee-
(i) and (ii) ** ** **
(iii) any one building in the occupation of a Ruler, being a building which immediately before commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, was his official residence by virtue of a declaration by the Central Government under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950;
72. A perusal of the above provisions, as in force in the assessment years 1970-71 and 1971-72 and the assessment years 1972-73 to 1976-77, shows that the exemption available to an assessee like the one before me is available in respect of one and only one building. Further, the exemption to be available in respect of such a building can be allowed for the assessment years 1970-71 and 1971-72 if the following conditions co-exist :
(i) the property in question should be a building ;
(ii) the building should be in the occupation of a ruler ; and
(iii) the building in the occupation of the ruler should stand declared by the Central Government as the official residence of the ruler by virtue of a declaration by the Central Government under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950.
73. A perusal of the provisions of Section 5(1)(iii) as it stood in the assessment years 1972-73 to 1976-77, an assessee like the one before me to claim the exemption under that provision has to bring the following conditions that stand collectively satisfied :
(i) the property in question should be a building ;
(ii) the said building should be in the occupation of a ruler ; and
(iii) the said building in the occupation of the ruler should be a building which prior to 28-12-1971 was his official residence by virtue of a declaration by the Central Government under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order 1950.
74. Parties before me are at variance as to the exact impart of provisions of Section 5(1) (iii) as it stood in the assessment years 1970-71 and 1971-72 and 1972-73 to 1976-77. According to the learned counsel for the assessee, the expression ‘any one building’ in Section 5(1)(iii) when read in the context of paragraph 15 of the Part B (Taxation Concessions) Order at page 16 of the paper book filed by the assessee was inter-changeable with the expression ‘Palace’ appearing in the aforesaid Order. ‘Umed Bhavan Palace’ in the case of the assessee, in view of the letters exchanged between V. Vishwanathan of the Government of India, Ministry of Home Affairs, New Delhi, dated 20-1-1958 and the reply of the assessee thereto dated 23-1-1958 at pages 17 and 18 of the paper book filed by the assessee, means the said palace including the compound. This conclusion is sought to be supported in the light of the existence of the adjective clause used in paragraph 15(1)(iii) of the Part B States (Taxation Concessions) Order, reading “declared by the Central Government as his official residence, under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950”. The stand of the assessee is that since Umed Bhavan Palace is to be considered for the purpose of the exemption under Section 5(1)(iii), the exemption extended not only to the superstructures of the palace but also to the entire land surrounding the palace. Support for this view is sought not only from interpretation given in the manner stated hereinbefore but also from the inventory of the private properties of the assessee as approved by the Ministry of States, Government of India vide their D.O. letter dated 17-9-1950 at pages 14 and 15 of the paper book (therein the private property of the assessee, inter alia, includes ‘Umed Bhavan including gardens, rari, building comprising the entire compound’, the letter of the Additional Secretary to the Government of Rajasthan, Jaipur, addressed to the District Collector, Kota, dated 17-9-1966 at pages 2-12 of the paper book filed by the assessee and the order of the District Collector, Kota, dated 16-9-1976 requisitioning the Umed Bhavan Compound Palace (excluding the Umed Bhavan Palace) admeasuring 2295 bighas and 13 biswas’, more so, when the said compound is demarcated by iron bars all around.
75. The above stand of the assessee is, however, controverted by the departmental representative. According to him, the exemption under Section 5(1)(iii) was available to the assessee in respect of one and only one building which may be in the form of one building or a cluster of buildings so as to constitute one building. This was clear not only from the plain reading of Section 5(1)(iii) as it stood in each of the years under consideration, more explicitly from the provisions of Section 5(1)(iii) as it stood in each of the assessment years 1972-73 to 1976-77. The expression ‘building’ would include not only the building or a cluster of buildings so as to constitute one building but also to the land appurtenant thereto for proper use and enjoyment of the said building. The exemption available under Section 5(1)(iii) cannot, however, be extended to the entire land surrounding the building or the cluster of buildings Umed Bhavan, Kota, as sought to be argued by the learned counsel for the assessee. The departmental representative further urged that the reliance on the inventory of private property the letter of the Additional Chief Secretary of the Government of Rajasthan, Jaipur and the requisitioning order by the Collector and District Magistrate, Kota relied upon by the learned counsel for the assessee is grossly misplaced. These documents have no relevance and bearing on the issue involved.
76. I, after deliberation, am inclined to agree with the revenue. Before I try to interpret the provisions of Section 5(1)(iii) as it stood in each of the year under consideration will like to make it clear that insofar as the inventory of private property approved by the Government of India, Ministry of States dated 13-9-1950 at pages 14 and 15 of the paper book filed by the assessee is concerned, the same constitutes a part of the merger agreement. The said merger agreement between the Government of India and the assessee, an erstwhile ruler of one of the Indian States, being not law has no binding force on the Income-tax Department. The same cannot be enforced in a Court of Law or any Tribunal-see in this connection the decisions of the Allahabad High Court in Nawab of Rampur (supra) and H.H. Maharaja Vibhuti Narain Singh (supra).
77. Another important thing to be noticed is that though the aforesaid inventory of private property of the assessee speaks of ‘Umed Bhavan including gardens, rari, building comprising the entire compound’, the notification issued by the Government of India dated 14-5-1954 in the case of the assessee in pursuance of the provision of item (iii) of paragraph 15 of the Part B States (Taxation Concessions) Order has for the purpose of paragraph 15 of the said order declared Umed Bhavan Palace as the official residence of the assessee. It may be also added that the sweep of paragraph 15 of the Part B States (Taxation Concessions) Order is different from the benefit in the shape of exemption available under Section 5(1)(iii). Under the aforesaid paragraph 15(1)(iii of the 1950 Order, annual letting value of the palaces of Rulers of Indian States which was/were declared by the Central Government as the official residence of such rulers ‘was not to be included in the total income of the ruler like the assessee. Coming to Section 5(1)(iii) as it stood in each of the years under consideration, one and only one building in the occupation of a ruler which stood declared by the Government as the official residence under the 1950 Order was exempt from the inclusion in the net wealth of the ruler like the assessee. I, therefore, for the reasons stated hereinbefore, hold that any reliance on the inventory of the private property of the assessee is not relevant for interpretating the meaning to be given to the provisions of Section 5(1)(iii).
78. Coming to the letter of the Additional Chief Secretary to the Government of Rajasthan addressed to the District Collector, Kota dated 17-9-1976. I find that the decision of the Government recorded therein pertains to the question as to whether Umed Bhavan including gardens, rari, building, etc., comprising the entire compound entered into inventory of the private property of the assessee mentioned in the covenant entered into between him and the Government of India would be considered to fall in the definition of the expressions ‘States’ and ‘Land’ appearing in the Rajasthan Land Reforms and Acquisition of Land Owners Estate Act. If the said property of the assessee was covered by the definition of the said expression, the same could be acquired under the Rajasthan Land Reforms & Acquisition of Land Owners Estates Act, otherwise not. The Additional Chief Secretary to the Government of Rajasthan has in the said letter informed the District Collector, Kota, that the said property of the assessee, namely, Umed Bhavan including gardens, rari, building, etc., comprising the entire compound could not be regarded as an ‘Estate’ and so could not be acquired under the aforesaid 1963 Act. I fail to see the relevance of this letter for the purposes of resolving the above controversy involved in the present case. The decision was rendered by the Chief Secretary in respect of Umed Bhavan including gardens, rari, building, etc., entered into the inventory of the private property of the assessee mentioned in the covenant entered into between him and the Government of India. Further, the decision of the Government is with reference to the aforesaid 1963 Act wherein the said Umed Bhavan including gardens, rari, building, etc., was considered to be abadi land and not agricultural land. This has nothing to do with the present controversy before me. The said decision was rendered in entirely different setting.
79. Coming to the requisitioning order dated 16/20-9-1976 issued by the Collector, Kota, under Section 23(1) of the Defence and Internal Security of India Act, 1961, I find that the Collector has requisitioned the land surrounding Umed Bhavan Palace building and the cluster of buildings of Umed Bhavan Palace. These too do not have any relevance in the matter of interpretation to be given to the provision of Section 5(1)(iii). Of course, the said requisitioning order has stated that the land surrounding the Umed Bhavan Palace building is in the compound of the said palace.
80. I now address myself to the meaning to be given to the expression ‘any one building’ appearing in Section 5(1)(iii). If we get Section 5(1)(iii), as it stood in the assessment years 1972-73 to 1976-77, I find that the adjective clause of that provision relied upon by the learned Accountant Member after the words ‘any one building in the occupation of a Ruler’ therein reads “being a building which immediately before commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, was his official residence by virtue of a declaration by the Central Government under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950”. Insofar as the words ‘was his official residence by virtue of a declaration by the Central Government under paragraph 15 of the Part B States (Taxation Concessions) Order, 1950’ in the said adjective clause appearing in Section 5(1)(iii) are concerned, the same have been incorporated therein merely to pin-point a particular official residence concerned of the ex-ruler instead of stating therein ruler-wise official residence of his declared by the Government of India under paragraph 13 of the Merged States (Taxation Concessions) Order 1949 or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950. As far as the first part of the said adjective portion of Section 5(1)(iii) reading ‘being a building which immediately before the commencement of the Constitution, (Twenty-sixth Amendment) Act, 1971’ is concerned, it clarifies beyond any shadow of doubt that when the same is read in conjunction with the earlier part of Section 5(1)(iii), namely, ‘any one building in the occupation of a Ruler’, the exemption available is in respect of a building and building alone and nothing more than that as sought to be argued by the learned counsel for the assessee. A ‘building’ (there cannot be any doubt in this behalf) means a building by itself or buildings in a cluster together with the land appurtenant thereto for due and proper enjoyment of the building. The said expression ‘building’ in Section 5(1)077) as it stood in the assessment years 1972-73 to 1976-77, in view of what I have stated hereinbefore, cannot embrace a vast land surrounding it as is the position taken by the learned counsel for the assessee. It will be difficult to accept the stand of the learned counsel, Mr. C.S. Agarwal, in this connection, I would, therefore, interpret the words ‘any one building’ in Section 5(1)(iii) as it stood in assessment years 1972-73 to 1976-77 in the context in which it appears there to mean the Umed Bhavan Palace Building(s) together with the land appurtenant there to have due and proper enjoyment thereof and not the entire land surrounding the same.
81. Coming to Section 5(1)(iii) as it stood in assessment years 1970-71 and 1971-72, the adjective part of Section 5(1)077) after the words ‘any building in occupation of a Ruler therein’ reads ‘declared by the Central Government as his official residence under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950’. As already stated in the preceding paragraph, the words ‘under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950’ have to be interpreted in the said adjective clause of Section 5(1)(iii) to pin-point the official residence of a ruler declared by the Central Government instead of enumerating therein ruler-wise, each and every official residence of his. The said adjective clause has to be interpreted in Section 5(1)(iii) as it stood in assessment years 1970-71 and 1971-72, to help in finding out the meaning to be given to the words ‘any one building in the occupation of a Ruler’. In my opinion, the benefit of exemption will be available thereunder in respect of one and only one building of the official residence of the ruler as declared by the Central Government which is also in the occupation of the ruler. The benefit of Section 5(1)(iii) in my opinion, cannot be extended to anything more than a building, which as already stated above, means a building or buildings in a cluster and the land appurtenant thereto for the proper use and enjoyment of the building concerned. It would be too much to read Section 5(1)(iii) as it stood in each of these two years under consideration, that the exemption available to a Ruler like the assessee before me under Section 5(1)(iii) in respect of any one building in his occupation should be so construed so as to mean something more than a building or buildings in a cluster and the land appurtenant thereto for proper use and enjoyment of the building concerned-the entire land admeasuring more than 2,000 bighas around Umed Bhavan as sought to be argued by the learned counsel for the assessee. 1949 (Taxation Concessions) Order or 1950 (Taxation Concessions) Order referred in Section 5(1)(iii) as already stated above confers certain benefit of the exemption of income in respect of the official residence(s) of a ruler pursuant to the declaration by the Central Government not to be included in his total income. That benefit in respect of the said official residence(s) cannot be so extended, as sought to be argued by the learned counsel, Mr. C.S. Agarwal, to the palace building of the entire land surrounding it when the exemption under Section 5(1)(iii) is available in respect of one and only one building in the occupation of a ruler.
82. It may be added over here that though the covenant between the assessee and the Government of India read with the list of private property of the assessee speaks of ‘Umed Bhavan including gardens, rari, building comprising the compound’, it is worthwhile to note that in the notification issued in pursuance of the provision of item (iii) of para 15 of the Part B States (Taxation Concessions) Order, the residence declared as official residence of the assessee as Indian State Ruler, inter alia, mentioned ‘Umed Bhavan’ Palace. As stated above, the inventory of the private property of the assessee being a part of the aforesaid covenant entered into between him and the Government of India the merger agreement was not law and, therefore, cannot be enforced in a Court of Law or in any Tribunal. As far as the letter of the Additional Chief Secretary to the Government of Rajasthan addressed to the Collector of Kota is concerned, the same has no relevance in the present case as has been brought out by me in paragraph 78 above. So is the position regarding requisitioning order of the so-called compound of Umed Bhavan Palace by the Collector of Kota dated 16-9-1976 as discussed by me in paragraph 79 above.
83. Coming to the arguments of the learned counsel for the assessee, Mr. C.S. Agarwal, that Umed Bhavan Palace building and the entire lands surrounding it constituted one unit which was not divisible or partitioned, being in one compound with one boundary wall, there canno be any doubt that the said entire land admeasuring over 2,000 bighas cannot be considered as land appurtenant to the Umed Bhavan Palace building. Only the land which is required for reasonable and proper enjoyment of that building or buildings in a cluster can be considered as the land appurtenant to the Umed Bhavan Palace building. The assertion that the entire above land surrounding the Umed Bhavan Palace building together with the said building or buildings in a cluster constituted one undivisible unit cannot be accepted. Even otherwise, the facts on record clearly prove to the contrary. I say so because the assessee had admittedly transferred diverse parts of the above Umed Bhavan Palace together with the land surrounding it to his family members by a declaration executed on 10-4-1972 which was registered on 1-12-1972. Further, in the wealth-tax assessment for the assessment year 1973-74, the assessee has claimed that he had kept a plot of land for erecting a cinema implying thereby that either the assessee himself intended to construct a cinema over there or he intended to sell that portion of land for the purposes of the construction of a cinema thereon. Not only in that year but in each of the subsequent years the assessee has been selling diverse part of the lands surrounding the Umed Bhavan Palace building or buildings in a cluster for consideration. As such, all these facts clearly go to prove that the land surrounding the Umed Bhavan Palace building was separable and demarcable. Further, the assessee by virtue of the covenant entered into between him and the Government of India had acquired the right to deal with his private property in any manner he liked including his right to parcel out and sell the same. The arguments of the learned counsel for the assessee, Mr. C.S. Agarwal, that the entire land surrounding the Umed Bhavan Palace building or buildings in a cluster constituted one unit cannot be accepted.
84. The sum and substance of my above discussion is that the expression ‘any one building in the occupation of a Ruler’ in Section 5(1)(iii) vis-a-vis the assessee in respect of which he is entitled to exemption thereunder, in each of the years under consideration is Umed Bhavan Palace building or buildings in a cluster and the land appurtenant thereto necessary for the proper use and enjoyment of the said building or buildings in a cluster and nothing beyond that.
85. I now address myself on the arguments advanced by the parties before me regarding the correctness of the stand taken by the learned Accountant Member in respect of so-called additional evidence which was, according to him, there on record of the years under consideration and was not there in the earlier years, i.e., the assessment years 1966-67 to 1969-70 which had come up for consideration before the Tribunal on the earlier occasion. The said additional evidence is detailed in para 37.5 of the order of the learned Accountant Member. The records of each of the years under consideration, I, after deliberation hold, are the records of each of those years as they stood at the relevant time before the WTO. Taking the letter of the WTO, dated 8-1-1969, addressed by him to the Tehsildar in M.A. File of 1957-58 assessment, the reply of the Tehsildar dated 23-1-1969 addressed to the WTO in reply to his letter referred to hereinbefore, the letter of the WTO, dated 21-2-1969, addressed to the assessee and map of the palace referred to at item Nos. (1) to (4) of para 37.5 of the order of the learned Accountant Member, first, these never formed part of the assessment records of the assessee for each of the years under consideration, i.e., the assessment years 1970-71 to 1976-77. They were never considered by the WTO in the course of the assessment proceedings for each of the years under consideration. As such, these letters and map cannot be considered to be an additional evidence on the wealth-tax assessment records of the assessee for each of the assessment years 1970-71 to 1976-77. Since these were never before the WTO in the course of the assessment proceedings so as to constitute part of the record of those assessments for the years under consideration and the same or any one of them was not considered by the WTO while making those assessments, these letters and map have no relevance in the present case.
86. Coming to the extract of the Accountant General’s letter dated 5-3-1976, the letter of the WTO dated 24-2-1977, the two replies of the assessee, dated 29-11-1977, one at pages 6 to 11 of the paper book filed by the revenue referred to in para 22.1 above and the other at pages 68 and 69 of the paper book filed by the assessee referred to in para 22.2 above and the report of the WTO to the IAC dated 3-1-1978, referred to at SI. Nos. 5, 6, 8 and 9 in para 37.5 of the order of the learned Accountant Member I, after deliberation and considration of the arguments advanced by the learned counsel, Mr. C.S. Agarwal and the departmental representative in this behalf, am of the considered opinion that the question involved in these letters/replies/reports which came up for consideration of the WTO in the course of the assessment proceedings for the assessment years 1970-71 and onwards was as to whether the land surrounding the Umed Bhavan Palace building was agricultural land, as was the case of the Accountant General in his Audit Note dated 5-3-1976, or non-agricultural land being abadi land, as was the case of the assessee and as to the extent of the agricultural land held by the assessee in each of those years. He (the WTO), as is clear from his report to the IAC and the observations in the wealth-tax assessment order for the assessment year 1970-71, has come to the conclusion that the agricultural land shown by the assessee for each of the assessment years 1970-71 and onwards was correct and that the land surrounding the Umed Bhavan Palace building was not agricultural land but abadi land, when he observed in that assessment order ‘Umed Bhavan land claimed not being agricultural land’. Maybe that in the two replies of the assessee, dated 29-11-1977, there was a reference to his assertion that the Umed Bhavan Palace building together with the land surrounding it, has been held and/or was exempt under Section 5(1)(iii), the WTO neither in the assessment order for the assessment year 1970-71 nor for any of the subsequent year, it appears, has applied his mind to that aspect of the case raised before him. I say so because there is o discussion in the assessment order in this behalf, when the WTO has otherwise dealt with the other claim of the assessee in those replies that the lands surrounding the Umed Bhavan Palace building was abadi land and not agricultural land vide assessment order for the assessment year 1970-71, had the WTO applied his mind to the exemption so claimed by the assessee under Section 5(1)(iii) in respect of the Umed Bhavan Palace building and the land surrounding it, there was no reason as to why the WTO should not have made any reference to the exemption so claimed, when he had dealt with the main thrust of the claim therein that the land surrounding the Umed Bhavan Palace building was abadi land and not agricultural land. Since the letter of the Accountant General, the letter of the WTO dated 24-10-1977 and the report of the WTO to the IAC dealt only with the question of the extent of the agricultural land held by the assessee and that the land surrounding the Umed Bhavan Palace building was not agricultural land but abadi land, the letters at SI. Nos. 5, 7 and 8 of para 37.5 of the order of the learned Accountant Member have no relevance for the purposes of the extent of exemption available to the assessee under Section 5(1)(iii) in respect of Umed Bhavan Palace building and the land surrounding it.
87. My observations in para 86 above also apply to the letter of the assessee to the WTO dated 27-9-1977 at SI. No. 6 of para 37.5 of the order of the learned Accountant Member, namely, that the WTO never applied his mind to the claim of the assessee under Section 5(1)(iii) nor did he make any enquiry into the claim made by the assessee either in the said letter dated 27-9-1977 or in his other two letters dated 29-11-1977 that he was entitled to exemption under Section 5(1)(iii) in respect of Umed Bhavan Palace building and the entire land surrounding it.
88. Insofar as the letter of the Additional Chief Secretary to the District Collector, Kota and the order of the District Collector, Kota, dated 16-9-1976 referred to at SI. Nos. 10 and 11 of para 37.5 of the order of the learned Accountant Member are concerned, they are wholly irrelevant for the purposes of the enquiry under Section 5(1)(iii) as brought out in paras 78 and 79 above. Further, the order at SI. No. 11 was never before the WTO in the course of the assessment proceedings for the years under consideration.
89. I next address myself on the question as to whether the Commissioner has validly assumed his jurisdiction under Section 25(2) as is the case of the revenue, or not, as has been very strenuously urged by the learned counsel, Mr. C.S. Agarwal.
90. This takes me to Section 25(2) which reads as under :
Without prejudice to the provisions contained in Section (1), the Commissioner may call for and examine the record of any proceeding under this head and if he considers that any order passed therein by a WTO is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling it and directing a fresh assessment.
As is clear from the provisions of Section 25(2), the order to be passed is a quasi-judicial one. It is well established that in exercising the said power, the Commissioner must bring there an unbiased mind and consider impartially the objection raised by the aggrieved parties and decide the dispute according to the procedure consistent with the principle of natural justice. In the exercise of that power, he cannot permit his judgment to be influenced by matter not disclosed to the assessee nor by the dictates of another authority. It also follows from the above provisions of Section 25(2) that the Commissioner can validly assume under Section 25(2) only when he establishes that the impugned order by the WTO is not only ‘erroneous’ but also ‘that the error had operated against the interests of the revenue’. In order to do so, he must pass a speaking order, clearly spelling out the particular ‘error’ and how it has caused loss of revenue.
91. According to the learned counsel for the assessee, the present case is one where the Commissioner has not validly assumed jurisdiction, inasmuch as, the Commissioner before issuing the show-cause notices under Section 25(2) had called for and had before him the assessment records of the WTO in the case of the assessee not only for the years under consideration but also for the assessment year 1957-58. A cursory examination for the assessment record, for the assessment year 1957-58 would have clearly indicated to the Commissioner that in respect of the assessment year 1957-58 there was a detailed query by the WTO regarding the question of the extent of exemption of Umed Bhavan Palace building and the land surrounding it. The WTO had then gone into the question, with the help of the independent enquiry then made, as to whether the Umed Bhavan Palace building together with the entire land surrounding it should be granted the exemption under Section 5(1)(iii) or should that exemption be confined only to the Umed Bhavan Palace building and the land appurtenant thereto. The WTO had written to the Tehsildar in this behalf, as also to the assessee on 1-2-1969. The reply of the assessee to the WTO is dated 17-3-1969. After the independent enquiry, the WTO had arrived at the conclusion in the wealth-tax assessment of the assessee for the assessment year 1957-58 that the Umed Bhavan Palace building and the entire land surrounding it was exempt under Section 5(1)(177). The assessee in his assessment proceedings for the years under consideration had drawn the attention of the WTO vide his letters dated 27-9-1977 and 29-11-1977 about the acceptance of the aforesaid claim regarding the exemption under Section 5(1)(177) in respect of the Umed Bhavan Palace including the entire land surrounding it in his assessment for the assessment year 1957-58. Reference was also made to the letter of the WTO dated 24-10-1977 as also the report of the WTO to the IAC dated 3-1-1978. Another point which was made out by the learned counsel, Mr. C.S. Agarwal, was that the Commissioner must have noticed that the assessee in Part IV of his return read with the relevant annexure had claimed exemption under Section 5(1)077) with regard to Umed Bhavan including the compound on the ground that it was the official residence of the assessee.
92. The Commissioner in the face of the aforesaid evidence on record could not, according to Mr. C.S. Agarwal, the learned counsel for the assessee, have come to the prima facie opinion that :
(i) the assessee had not declared in the wealth-tax return, the extent of the Umed Bhavan and the compound attached therewith and the size of that compound ; and
(ii) the WTO had failed to make enquiry whether the land in question surrounding Umed Bhavan was exempt under Section 5(1)077).
The said returns read with the material referred to in paragraph 37.5 of the order of the learned Accountant Member, as also the assessment of the assessee for the assessment year 1957-58 clearly established that there was no failure on the part of the assessee in making requisite declaration in the return with regard to Umed Bhavan and the adjoining land nor was there any failure on the part of the WTO to make enquiry whether the land in question was part of Umed Bhavan Palace and whether it was exempt under Section 5(1)(iii).
93. The observations of the Commissioner in the show-cause notices for the years under consideration and his impugned orders, in the light of the arguments by the learned counsel is detailed in para 40 above, it was urged by the learned counsel that it clearly established that the assumption of jurisdiction by the Commissioner was without jurisdiction. In this connection, the learned counsel had taken me through paras 34, 35 and 36 of the order of the learned Accountant Member to butter-ess his argument regarding the absence or lack of assumption of valid jurisdiction by the Commissioner under Section 25(2).
94. In reply, the stand taken by the departmental representative was that the jurisdiction was validly assumed by the Commissioner under Section 25(2). According to the departmental representative, we have to see not what was before the Commissioner when he went on to form prima facie opinion to assume jurisdiction under Section 25(2), but only to the material, if any, before the WTO in the course of the assessment proceedings for the years under consideration and whether the WTO, while making the assessment for each of the years under consideration, has applied his mind at all and/or whether did he make an enquiry in respect of the exemption claimed by the assessee under Section 5(1)(iii) in respect of Umed Bhavan Palace building and the entire land surrounding it. Maybe that claim for exemption under Section 5(1)(iii) by the assessee in respect of Umed Bhavan Palace building and the entire land surrounding it was there, but the WTO neither made any requisite enquiry in this behalf nor did he apply his mind at all in the matter of exemption claimed.
95. I, after deliberation, agree with the revenue that the Commissioner had validly assumed jurisdiction. It is correct, as rightly argued by the departmental representative that the position of the assessee in the wealth-tax return for the assessment year 1970-71 in Part IV, was the same as was the position in the wealth-tax returns for the assessment years 1966-67 to 1969-70. He had not claimed exemption in respect of Umed Bhavan. Insofar as the assessment years 1971-72 and 1972-73 are concerned, the exemption claimed by the assessee in Part IV of each those returns read with the relevant annexure thereto was in respect of ‘Umed Bhavan, Kota’. From the annexures and Part IV to the wealth-tax returns of the assessee for the assessment years 1973-74 to 1976-77, it appears that the assessee claimed that the house ‘Umed Bhavan Kota’ including the compound, which, according to the learned counsel for the assessee, encompasses the entire land surrounding Umed Bhavan Palace building, was claimed to be exempt under Section 5(1)(iii). It further appears from the reply of the assessee dated 27-9-1977 at page 67 of the paper book filed by the assessee, the letter of the WTO dated 24-10-1977 at pages 4 and 5 of the paper book filed by the revenue and the two replies of the assessee to the WTO dated 29-11-1977, the one at pages 6 to 8 of the paper book filed by the revenue and the other at pages 68 and 69 of the paper book filed by the assessee, read with Audit Note of the Accountant General dated 5-3-1976 at page 3 of the paper book filed by the revenue and letter of the WTO with annexures to the IAC at pages 9 to 11 of the paper book filed by the revenue, that the WTO had raised the question with the assessee as to whether the land around the Umed Bhavan Palace building was agricultural land or urban land or abadi land. In that connection, the assessee in the assessment proceeding for the assessment year 1970-71 had in reply to the query raised by the WTO in that behalf had also stated that :
In this connection, we submit that the entire Umed Bhavan including rari and compound is a personal property of Maharaja Sahib and is exempt from the purview of wealth-tax under Section 5(1)(iii) of the Wealth-tax Act. This point has already been clarified in the assessment relevant to the assessment year 1957-58.
The land of Umed Bhavan compound is abadi land and not agricultural land, in this connection we drow your kind attention to the letters of the Assistant Secretary, Government of Rajasthan… dated 17-9-1966 in which they have clarified that the said land is not agricultural land but abadi land, a copy of which is enclosed herewith. Therefore, the entire land comprising Umed Bhavan is exempt under Section 5(1)(iii) of the Wealth-tax Act, 1957 and the same point has already been finalised in the assessment year 1957-58.
96. In the reply of the assessee at pages 68 and 69 of the paper book filed by the assessee, he has also stated as under :
1. Your goodself has observed that why the agricultural land of Kherli Purohit 594 bighas, Dostpura 559 bighas and Khand Gaunri 1050 bighas was not shown in the return.
In this connection we would like to draw your kind attention to our letter dated 27-9-1977 in which we have submitted that these are not agricultural land. These lands comprises Umed Bhavan which is the official residence of Ex-Ruler of Indian State Kota.
In this connection as desired by your goodself we have filed the order of the Government of Rajasthan No. FLG/17/Rev./A/65 dated 17-9-1966 according to which aforesaid lands are not agricultural land and are comprising in Umed Bhavan which is the personal property of Maharao Sir Bhim Singhji Sahib of Kota-original order is ready for your kind perusal and verification.
The entire Umed Bhavan is declared as official residence of ex-ruler which is exempt under Section 5(1)(iii) of the Wealth-tax Act, 1957 and this point has been discussed at length in the past and since then exemption is being allowed. Therefore, we hope your goodself would now be quite satisfied on this point.
97. In the other reply of the assessee dated 29-11-1977 at pages 5 to 8 of the paper book filed by the revenue, the assessee after referring to diverse agricultural land and the extent of the so-called difference in the area thereof shown in the return for the assessment year 1970-71 and onwards and the area stated in the Audit Note dated 5-3-1976 at page 3 of the paper book filed by the revenue, the assessee at page 8 has stated that “Umed Bhavan is official residence of Ex-Ruler…Hence, it is exempt under Section 5(1)(iii)….”
98. In the report by the WTO to the IAC dated 3-1-1978, the WTO after considering the aforesaid Audit Note and the reply of the assessee has stated in that letter that “thus in my opinion there is no difference of land shown by the assessee”.
99. As is clear from the assessment order of the assessee for the assessment year 1970-71, the said correspondence was duly considered only regarding the case of the assessee that the land surrounding Umed Bhavan building was abadi land and not agricultural land. That is why the WTO in the assessment of the assessee for the assessment year 1970-71 has stated that the land surrounding the Umed Bhavan Palace building was not agricultural land. See in this connection the discussion in para 86 above. At the same time, the assessment orders for each of the assessment years 1970-71 to 1976-77 read with the aforesaid correspondence also shows that in those assessment orders, the WTO has not discussed the claim of the assessee for exemption under Section 5(1)(iii) in respect of Umed Bhavan Palace building and the entire land surrounding it. The WTO does not appear to have applied his mind to this question nor did he make any enquiry in this behalf, had he done so, he would have, as he had done for holding the land surrounding Umed Bhavan Palace building to be non-agricultural land meaning thereby to be abadi land, incorporated his decision, if any, regarding the above exemption claimed by the assessee under Section 5(1)07/). Nor did he make an enquiry in this behalf. That was, however, not done by him. This conclusion of mine finds support from the computation of the net wealth of the assessee for each of the years under consideration. Taking first assessment year 1970-71, I find that under the head ‘immovable assets’ under items 1 and 2 the WTO has stated as under :
Rs.
"(1) Value as per Jast year... 8,66,220
Less: Sold during the year Rs.
1. Part of old treasury house 34,100
2. Staff Qr. No. 1 partly 12,500
3. Math Kashndya partly 15,000
4. Dr. Abdul Wahidwala House 14,100
5. Haveli Udaipurwali, Phool
Behariji Mandi 8,900
6. Maji Sahibawala House 2,800
7. Gaushala Majisahiba House 3,000
8. Kothna Retwali 10,200
9. Haveli Bari Udaipurwali 9,750
partly 1,10,350
7,55,850
(2) Agricultural Land
Total 1345 bighas out of
'Kota. The assessee sold
most of the land in subsequent
years ranging between Rs. 300
to Rs. 800 hence, the value
is taken at the average rate
of Rs. 500 per bigha and
rounded the value at 6,80,000
Less : Exemption
Umed Bhavan land
claimed not being
agricultural land 50,000
5,30,000
12,85,650
100. It is an admitted position that the assessment of the assessee for the assessment year 1969-70 alongwith his assessments for the assessment years 1966-67 to 1968-69 was the subject of the order by the Commissioner under Section 25(2) and the said order of the Commissioner has been upheld by the Tribunal (Jaipur Bench, Jaipur) in WT Appeal Nos. 347 to 350 (Jp.) of 1979 (supra). The effect of these two orders read together with the wealth-tax assessment orders passed by the WTO for those years was that the assessment for the assessment years 1966-67 to 1969-70 were set aside being erroneous and prejudicial to the interests of the revenue with a direction to the WTO to make assessment orders afresh for those years in accordance with law and that the land admeasuring 2507 bighas surrounding the Umed Bhavan Palace building was not available for exemption for the purposes of assessment under the Act. This in turn means that the value of immovable assets taken under item 1 for the assessment year 1970-71 at Rs. 8,66,200 no longer held good. The same is the position regarding the computation of the net wealth of the assessee in the matter of immovable assets for each of the other years under consideration, i.e., assessment years 1971-72 to 1976-77.
101. Position being as stated hereinbefore, the WTO has adopted the value of the immovable property for each of the assessment years 1970-71 to 1976-77 ‘as per last year’ and not with reference to the past records of the assessee. The disclosure of information regarding the exemption claimed by the assessee under Section 5(1)(iii) in respect of Umed Bhavan Palace/Umed Bhavan Palace including the compound in Part IV of the returns for the assessment years 1971-72 to 1976-77 may be relevant for not invoking jurisdiction under Section 147 of the Act. The proceedings before the Tribunal pertain to the invocation of jurisdiction by the Commissioner was under Section 25(2). The Commissioner has, in view of what we have stated hereinbefore, correctly held that the WTO in the assessments of the assessee for the assessment years 1970-71 to 1976-77 did not apply his mind at all as to whether the land surrounding the Umed Bhavan Palace building was exempt under Section 5(1)(iii), nor did he make any enquiry in this behalf. He has only applied his mind, as is clear from the assessment of the assessee from, the assessment year 1970-71, as to whether that land was agricultural land or abadi land when he held that the said land was abadi land and not agricultural land. The WTO, as already stated above, never applied his mind to the question of exemption of the said land under Section 5(1)(iii). He has not discussed the claim of the assessee in this behalf in the assessment orders for the years under consideration. As already stated, the assessment orders for each of the years passed by the WTO, make a reference to the computation of net wealth of the assessee in the matter of immovable assets as per last year and not to the past records. The assessment of the assessee for the assessment year 1970-71 talks of the last year, which means the assessment year 1969-70. The assessment for that year stands set aside by the Commissioner under Section 25(2). That order has been upheld by the Tribunal. There is no res judicata or estoppel in wealth-tax. Each assessment year is a separate year of assessment. The ratio of the decision of the Supreme Court in the case of Rampyari Devi Saraogi (supra) squarely applies in the present case. In that case, the Supreme Court has held that the Commissioner may consider an order of the ITO to be erroneous not only if it contains some apparent error or reason or of law or of fact on the face of it but also because it is a stereotyped order which simply accepts what the assessee had stated in his return and fails to make enquiries which are called for in the circumstances of the case. As stated by me earlier, there is no mention in the assessment orders passed by the WTO that he considered land surrounding Umed Bhavan Palace building to be exempt under Section 5(1)(iii)-The Tribunal has already held that for the assessment years 1966-67 to 1969-70, there was nothing on record of those years that the WTO had taken any such decision as contended by the assessee before us for those years. Para 13 of the order of Commissioner under Section 25(2) for those assessment years hold good.
102. I may add over here that the reliance by the assessee on the letter of the WTO, dated 24-11-1978 and the reply of the assessee together with the annexures as also the letter of the ITO dated 8-6-1979 addressed to the assessee and the reply of the assessee thereto dated 12-6-1979 in misplaced because these papers came into existence after assessment orders for the years under consideration, i.e., assessment years 1970-71 to 1976-77 were made in January and March 1978. As such, this correspondence, relied upon by the assessee, was never considered by the WTO before making those assessments. These have to be ignored as rightly argued by the departmental representative.
103. Reference by the learned Accountant Member in para 35.5 regarding the issue of the non-inclusion of the net wealth by the WTO of diverse amounts of cash mentioned in the show-cause notice for the assessment years 1973-74 to 1976-77 under Section 25(2), it may be added that the said aspect is not relevant at ¦ this stage, because this aspect of the case never became the subject-matter of the orders of the Commissioner under Section 25(2). The Commissioner raised this issue in the show-cause notices but he did not take any action in this behalf after considering the explanation of the assessee in this behalf.
104. I, therefore, on the facts and in the circumstances and the above discussions, hold that the jurisdiction by the Commissioner under Section 25(2) was validly assumed by him.
105. I have also considered the arguments advanced by the parties regarding the validity of the order passed by the learned Judicial Member. After due consideration of those arguments, I do not agree with the learned counsel that the order of the learned Judicial Member is not a speaking order. I say so because in para 5, the learned Judicial Member has recorded a clear finding that he could not agree with the learned Judicial Member regarding his findings that the Commissioner had not validly assumed jurisdiction and the assessee was entitled to exemption claimed under Section 5(1)(iii). According to him, the facts in the years under consideration are similar as in the assessment years 1966-67 to 1969-70. The arguments raised in the appeals before the Tribunal appearing to have been raised earlier before it. “All these conditions have been considered by the Tribunal earlier. No conclusive reasons could be advanced on behalf of the assessee as to why we should not follow the earlier consolidated order of the Tribunal. I am convinced that the facts and circumstances clearly warrant that there is no need to differ from the said findings of the Tribunal.”
106. I, after deliberation and hearing the parties at length, find that the facts in the present case for the years under consideration are similar to those in assessment years 1966-67 to 1969-70 except to the extent stated below :
1. In the wealth-tax returns for the assessment years 1971-72 and 1972-73 the assessee had, in Part IV return claimed exemption in respect of ‘Umed Bhavan’ Kota. In Part IV of the wealth-tax returns for the assessment years 1973-74 to 1976-77 exemption under Section 5(1)(iii) was claimed in respect of Umed Bhavan, Kota, including the compound. No such claim was made in Part IV of the wealth-tax returns for the assessment years 1966-67 to 1969-70.
2. In the wealth-tax proceedings for the assessment year 1970-71, the assessee, while replying the WTO as to whether the land surrounding Umed Bhavan Palace building should be treated as agricultural land or abadi land or urban land, as stated, as is clear from his letter dated 27-9-1977, that the entire Umed Bhavan including rari and compound was the personal property of the assessee and was exempt under Section 5(1)(iii) and the said point had already been clarified/ finalised in the assessment year 1957-58.
3. The assessee in his replies dated 29-9-1977 with reference to the letter of the WTO dated 24-10-1977, which is to be read in conjunction with the Audit Note dated 5-3-1976 by the Accountant General, had taken the stand that the land surrounding Umed Bhavan Building was not agricultural land but abadi land as decided by the Government of Rajasthan in the letter dated 17-9-1966. That said land of Umed Bhavan Palace, which was the official residence of the assessee, was exempt under Section 5(1)(iii). The said point had been discussed at length in the past. Since then, the exemption was being allowed. Further, we have got the report by the ITO to the IAC dated 3-1-1978.
4. The WTO in the assessment of the assessee for the assessment year 1970-71 has held that the land surrounding Umed Bhavan Palace building was not agricultural land.
107. The sum and substance of my above discussion is that the impugned orders of the Commissioner under Section 25(2) have to be upheld, subject to the directions given by the Tribunal in its aforesaid earlier order. For the assessment years 1966-67 to 1969-70, detailed in paragraph 18 above.
