SAKARLAL BALABHAI Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioners herein by these two petitions challenge the constitutional validity of ss. 22 and 23 of the IT Act, 1961, and the legality of the notices dated 29th March, 1972, issued by respondent No. 1 herein under S. 148 of the said Act for reopening the assessments for asst. yrs. 1967 68 and 1968 69, as he had reason to believe that income of the petitioners chargeable to tax for the said years had escaped assessment within the meaning of S. 147 of the said Act. In order to appreciate the rival contentions in proper perspective, a few facts need be stated.

(2.) PETITIONER No. 1 is the son and petitioners No. 2 and 3 are grandsons of one Balabhai Damodar who died on 31st December, 1957, in jointness with his son, petitioner No. 1, and two grandsons petitioners No. 2 and 3 and other great grandsons. The deceased Balabhai had separate properties as well as joint family properties. The deceased had executed a will dated 6th October, 1956, bequeathing his undivided 1/2 share in the joint family properties which consisted of partnership business, shares, securities and immovable properties, as well as individual properties to his grandsons, petitioners No. 2 and 3 herein. Though no executor was appointed for carrying out the directions in his said will, petitioner No. 1 administered the properties bequeathed under the will as executor and legal representative of the late Balabhai Damodar. Petitioner No. 1 on the death of his father, the said Balabhai, also received his 1/2 share in the joint family property, he being a coparcener and he, therefore, qua his 1/2 share constituted along with his two sons, petitioners No. 2 and 3, and their sons a smaller HUF of which he was the Karta. In these two petitions, we are concerned only with the 1/2 share of the late Balabhai Damodar in joint family properties which he bequeathed by will to petitioners No. 2 and 3 as well as with the 1/2 share in the same which petitioner No. 1 received as coparcener. After the death of Balabhai, the income from the estate of the deceased which was bequeathed to petitioners No. 2 and 3 under the aforesaid will was assessed in the hands of petitioner No. 1 as a legal representative of late Balabhai Damodar. The income from the remaining 1/2 share which belonged to petitioner No. 1 was assessed in his hands as Sakarlal Balabhai (HUF). The joint family properties included, inter alia, two plots of land bearing final plot No. 560 and 583 of Ellis Bridge Town Planning Scheme No. 3, with buildings standing thereon situated in Ellis Bridge, Ahmedabad (hereinafter referred to as "the immovable property"). Both the buildings and the open plots of land appurtenant thereto were self occupied by the petitioners and their families. It is the case of the petitioners that for purposes of determining the income from the properties of petitioner No. 1 as legal representative of late Balabhai Damodar, the letting value of the immovable property up to the asst. year 1961 62 was taken as the same as per the Municipal valuation by the predecessor of respondent No. 1. It appears that the predecessor in office of respondent No. 1 had issued a notice for reassessment relating to asst. yrs. 1960 61 and 1961 62, under S. 147(b) of the Act against petitioner No. 1 for reassessing him in respect of the property income from 1/2 share of the immovable property in his capacity as legal representative of the late Balabhai Damodar and in respect of the remaining 1/2 share in his capacity as the Karta of his smaller HUF. The proceedings for reassessment where the subject matter of appeals up to the Tribunal and the valuation was ultimately finalised for the whole of the immovable property at Rs. 30,600 for determining property income as against Rs. 33,600 determined by the predecessor of respondent No. 1. The Tribunal has passed the respective orders in June, 1969, and January, 1970, against petitioner No. 1 as the Karta of his smaller HUF and as legal representative of late Balabhai Damodar. It is the case of the petitioners that up to the date of the impugned notices the said valuation as determined by the Tribunal was accepted by respondent No. 1 also. However, on 29th March, 1972, respondent No. 1 has in exercise of the power under S. 148 of the IT Act, 1961, issued four notices, two of which were served on petitioner No. 1 as the Karta of his smaller HUF as well as the legal representative of late Balabhai Damodar and the remaining two were served on petitioners No. 2 and 3 stating that he had reason to belive that the income of the petitioners chargeable to tax for asst. year 1967 68 had escaped assessment within the meaning of S. 147 and he, therefore, proposed to reassess the income for the said assessment year. Similarly, by notices of 30th March, 1972, he intimated to the petitioners that he proposed to reassess the income for asst. year 1968 69, since he had reason to believe that the income of the petitioners chargeable to tax for the said assessment year had escaped assessment. It is common ground that respondent No. 1 proposed to reassess the petitioners in respect of the income from the immovable property, namely, the buildings and the lands occupied by them, under S. 147(b) of the Act.

(3.) THESE petitions have been opposed by the respondents on whose behalf one Shri K. N. Lalchandani, ITO, Special Investigation Circle VI, Ahmedabad, has filed an affidavit in reply. It has been stated in the said affidavit in reply that out of the aforesaid two immovable properties, the building standing on final plot No. 560 was situated near M. J. Library in Ellis Bridge, Ahmedabad. The second property was standing on final plot No. 583 situated near Nagri Eye Hospital, Ellis Bridge, Ahmedabad. It has been averred in the said affidavit in reply that for purposes of completing wealth tax assessments in these cases of the assessees, the properties were inspected by the Executive Engineer (Valuation Cell of the IT Department) and it was found by him that the values of the two properties aforesaid were much higher than that shown by the petitioners. The property near M. J. Library was valued for wealth tax purposes at Rs. 6,05,000 by the petitioners while the Executive Engineer had valued the same at Rs. 23,26,000 for asst. year 1967 68. Property situated near Nagri Eye Hospital, Ellis Bridge, Ahmedabad, was similarly valued by the petitioners at Rs. 5,53,000 ; whereas the Executive Engineer had valued the same at Rs. 13,22,000. The total valuation of the aforesaid two properties as per the Executive Engineer of the Valuation Cell of the IT Department was more than Rs. 36,38,000 for the asst. year 1967 68. It has been thereafter stated in the said affidavit in reply as under :