Delhi High Court (AUGUST 6, 1991) 1991 (TLS)117689 1991-DLT-45-417 :: 1991-RLR-0-485 SOHAN SINGH BASI Vs. UNION OF INDIA B. N. Kirpal, J. ( 1 ) THE challenge in this writ petition is to the notice issued under Section 17 of the Wealth Tax Act on 25th February 1984, seeking to re-open the assessment of the petitioner for the year 1975-76. ( 2 ) BRIEFLY stated, the facts are that the petitioner had filed his return of Wealth-tax disclosing a total wealth which was taxable at Rs. l,95,906. 00. In part 6 of the return, the petitioner had disclosed that he had shares worth Rs. 20. 530. 00. The name of the company of which shares were held, was not disclosed. However, a statement of Wealth-Tax as on 31-3-1975 was filed. This indicated that the petitioner had 200 Equity Shares of Rs. 100. 00 each of Continental Construction Pvt. Ltd. valued at Rs. 20. 000. 00 and 5 Equity Shares of Rs. 100. 00 each in Basi Agriculture Farm valued at Rs. 500. 00. During the assessment proceedings, the Income had Expenditure account as well as the Balance Sheet of the petitioner was filed with the Wealth Tax Officer. A Certificate on behalf of the Continential Construction Pvt. Ltd dated 6th December, 1978 was also produced which certified that the petitioner was holding 200 Equity Shares of Rs. loo each of the said company as on 31st March, 1975. It seems that a revised return was also filed wherein the value of the shares was indicated as Rs. 20,500. 00. ( 3 ) ON the basis of the return which was filed and the discussion which was held with the representative of the petitioner, the Wealth Tax Officer assessed the petitioner to Wealth-tax by passing an order undersection 16 (3) of the Wealth Tax Act. The Wealth Tax Officer accepted the value of the moveable property as declared which included the value of the shares of Continental Construction Pvt. Ltd. ( 4 ) THE impugned notice under Section 17 was then issued on 25th February, 1984 and served on the petitioner on 7th March, 1975. The reason for issuing the notice under Section 17 was that on the basis of balance sheet of Continental Construction Pvt. Ltd. , the break-up value of the shares came to Rs. 2935. 69 and there had therefore, been an escapement of a wealth from assessment. The reason for issuing the notice under Section 17 was that on the basis of balance sheet of Continental Construction Pvt. Ltd. , the break-up value of the shares came to Rs. 2935. 69 and there had therefore, been an escapement of a wealth from assessment. ( 5 ) ON behalf of the petitioner, it is contended that he had furnished to the Wealth Tax Officer all material facts and, therefore, there was no reason or justification for the issuance of the notice under Section 17. The respondents, however, contend that it was the duty of the petitioner to indicate as to how he had arrived at the value of the shares at Rs 100. 00 each and as this was not indicated, the petitioner bad failed to disclose all material facts. ( 6 ) IT is now well settled that if the assessee discloses all primary and material facts, then notice purporting to re-open an assessment cannot be issued (see Calcutta Discount Co. v. ITO, 41 ITR 191 ). According to Section 17 (l) (a) as it stood at the relevant time, notice seeking to re-open the assessment could be issued, inter alia, on the ground that the assessee had not disclosed fully and truly all material facts necessary for the assessment of his net wealth. Shri Rajendra contends that the use of the word "necessary" in the said Section indicates that the petitioner should have disclosed to the Wealth Tax Officer, the break-up value calculated in accordance with the provisions of Rule ID of the Wealth Tax Rules. ( 7 ) IN our opinion what the assessee has to do is to disclose all primary and material facts which can enable the Wealth Tax Officer to make an assessment. The primary and material facts must be those which are in possession or knowledge of the assessee. What are primary and material facts must depend on the facts of each case. As far as the value of the shares is concerned for including in the net wealth, all that is relevant, in our opinion, is for the assessee to show the company of which shares are held and the number of shares which the assessee holds. Furthermore, the assessee is also required to value the shares. In the present case, all the three things have been shown. Furthermore, the assessee is also required to value the shares. In the present case, all the three things have been shown. The petitioner has indicated that beholds 200 shares of Continental Construction Pvt. Ltd. and he had valued them at the face value of Rs. 100. 00. ( 8 ) IT is no doubt true that if rule ID was sought to be applied, then the Wealth Tax Officer would have tried to ascertain or work out the break-up value of the said shares. But the question which arises is as to whether it was incumbent upon the petitioner to inform the Wealth Tax Officer as to how the Wealth Tax Officer should value of the shares. The petitioner was only duty bound to disclose material facts which he did. If the contention of Shri Rajendra is accepted, it would mean that the petitioner would have been required to give justification for the value which he had fixed on the shares viz. , Rs. 100. 00 each. The petitioner had valued his shares at Rs. 100. 00. He was under no obligation to give the reason as to why he had adopted such a value unless asked to do so by the assessing officer. Merely because the value returned by him may not have been the correct market value calculated In accordance with Rule ID, is no ground for our holding that the petitioner had not disclosed all the material and relevant facts In this connection reference may usefully be made to two decisions, one is of 119 ITR 629 (Smt. Rajeshwari Birla v. W. T. O. ). That was also a case where the question arose with regard to the valuation of the un-qouted shares. The assessee had filed a wealth-tax return valuing the un-quoted shares and assessment had been made. Thereafter a circular was issued whereby the mode of valuation was sought to be changed. Notices were then issued under Section 17 of the Wealth Tax Act seeking to re-open the assessment. The Single Judge of the Calcutta High Court came to the conclusion that the assessee had disclosed all primary and material facts and, therefore, there was no justification for issuing a notice under Section 17. Notices were then issued under Section 17 of the Wealth Tax Act seeking to re-open the assessment. The Single Judge of the Calcutta High Court came to the conclusion that the assessee had disclosed all primary and material facts and, therefore, there was no justification for issuing a notice under Section 17. ( 9 ) IN the case of Acchut Kumar S. Inamdar v. P. R. Hajarnavis, 132 ITR 331, the assessee had disclosed in his Wealth-tax return that he was a partner of a firm which owned immoveable property. The value of the assessee s share was indicated and assessment was made. Subsequently Wealth Tax Officer issued notice under Section 17 ( 1 ) (a) seeking to re-open the assessment on the ground that the property in question, which was land in that case, had been under-valued. While quashing the notice issued under Section 17, the learned Single Judge of the Bombay High Court observed that the assessee haddisclossed material facts necessary for the assessment. It was held that merely because the valuation stated by the assessee in his return was inaccurate was not sufficient to assume jurisdiction and issue notice under Section 17 of the Act. It was further held that the failure to produce the balance sheet of the land development firm of which the assessee was a partner, with the return, did not amount to non-disclosur. e of the primary facts, as there is no mandatory provision under the Act requiring the assessee to produce its evidence alongwith the return. ( 10 ) WE are in complete agreement with the decision of the Bombay High Court. What, in effect, the learned counsel for the respondents seeks to agitate is that the petitioner has justified his valuing the shares at Rs. 100. 00 each at the time when the original assessment was made. That, In our opinion, was not a duty, which was cast by law on the petitioner. The petitioner was undoubtedly required to disclose fully and truly the extent of his share holding in the company, which in this case, was a Private Limited Company and the fact that the shares were un-quoted and lastly the value which the petitioner placed on those shares. It is alleged that the shares were under-valued by the petitioner. The petitioner was undoubtedly required to disclose fully and truly the extent of his share holding in the company, which in this case, was a Private Limited Company and the fact that the shares were un-quoted and lastly the value which the petitioner placed on those shares. It is alleged that the shares were under-valued by the petitioner. Even if this be so, this is only an allegation by the Department based on the break-up value astertained by it. The petitioner close to value the shares as per the face value and according to the Department, the law required the value to be determined on break-up basis. Now if a different method of valuation is adopted on the basis of the law, then it cannot be said that merely because the correct law has not been applied, the assessee has not disclosed material facts. What the petitioner is required to disclose are the facts and not the law. The petitioner is to disclose the facts and it is for the Wealth Tax Officer to apply, the law. If on appropriate application of law, the value of the shares as disclosed, has to be altered, then the Wealth Tax Officer would be justified in doing so. But that would not mean that if the correct law has not been applied though the material facts have been given, then because Wealth Tax Officer has not applied the correct law, a notice under Section 17 (1) (a) is to be issued. In our opinion, for not applying the correct law and thereafter correctly determining the value of the un-quoted shares, the Wealth Tax Officer may have been justified in invoking the provisions of Section 17 (1) (b) but there would be no occasion to apply Section 17 (1) (a ). A similar question did not arise before this Court in the case of Ganga Saran and Sons v. ITO, l30 ITR 212. In that case a property had been sold. The sale price was determined as per the consideration shown in that sale deed. Subsequent to the assessment, information was received that the market value of the property in question was much higher. The Income Tax Officer sought to reopen the assessment by issuing a notice under Section 147 (a ). In that case a property had been sold. The sale price was determined as per the consideration shown in that sale deed. Subsequent to the assessment, information was received that the market value of the property in question was much higher. The Income Tax Officer sought to reopen the assessment by issuing a notice under Section 147 (a ). A Division Bench of this Court held that clause (a) of Section 147 was not attracted because it was not the duty of the assessee to inform the Income Tax Officer that the property which had been sold at a price might not be commensurate with the market price on the date of the sale. This Court, however, held that the impugned notice could be upheld under the provisions of clause (b) of Section 147. The facts in the present case are pari materia similar to the case of Ganga Saran (supra) and applying the aforesaid ratio, we have no hesitation in coming to the conclusion that primary and material facts were ^disclosed by the petitioner in the present case and, therefore, notice under Section 17 (l) (a) could not be validly issued. ( 11 ) FOR the aforesaid reasons, the writ petition is allowed and the impugned notice dated 25th February, 1984 issued under Section 17 (1) (a) is quashed. There will, however, be no order as to costs. --- *** --- .